VAUGHAN, ON - GFL Environmental Inc. (NYSE: NYSE:GFL) (TSX: GFL) announced the sale of its Environmental Services business to investment funds managed by Apollo (NYSE:APO) and BC Partners for an enterprise value of $8.0 billion. Apollo, currently trading near its InvestingPro Fair Value with a market capitalization of $95.7 billion, has demonstrated strong market performance with an 80.8% return over the past year. The transaction is expected to close in the first quarter of 2025, subject to customary closing conditions.
The deal will see GFL retain a $1.7 billion equity interest in the business, while expecting to realize approximately $6.2 billion in cash proceeds, net of the retained equity and taxes. GFL plans to use up to $3.75 billion of the net proceeds to repay debt, with up to $2.25 billion earmarked for share repurchases, depending on market conditions. The remainder will cover transaction fees and general corporate purposes.
Patrick Dovigi, GFL’s Founder and CEO, stated that the sale price exceeded initial expectations and reflects the company’s quality. He emphasized the transaction’s role in deleveraging GFL’s balance sheet, which is expected to accelerate the company’s path to an investment-grade credit rating. Dovigi also highlighted the potential for increased returns to shareholders and the maintenance of a net leverage ratio around 3.0x.
The debt repayment is anticipated to reduce annualized cash interest expenses by about $200 million, thereby improving free cash flow conversion. Dovigi also mentioned the possibility of repurchasing the Environmental Services business within five years of closing.
Apollo’s Partner Craig Horton expressed enthusiasm for the growth potential of GFL Environmental Services, citing the flexibility and strategic resources Apollo offers. With a solid financial position reflected in its 1.93 current ratio and strong analyst backing (consensus recommendation: 1.8), Apollo continues to demonstrate its prowess in strategic acquisitions. According to InvestingPro, which offers 12+ additional insights about Apollo’s performance, the company maintains a prominent position in the Financial Services industry. Paolo Notarnicola, Partner and Co-Head of Services at BC Partners, also praised the growth trajectory under Dovigi’s leadership and the future potential for the business.
The transaction involves GFL maintaining a 44% equity interest, with Apollo Funds and BC Funds each holding 28%. GFL’s board, with interested directors recused, unanimously approved the deal based on a recommendation from a special committee of independent directors and a fairness opinion from Canaccord Genuity Corp.
Financial advisement for GFL was provided by Brown, Gibbons, Lang & Company Securities, Inc. and J.P. Morgan Securities LLC, with legal counsel from Latham & Watkins LLP and Stikeman Elliott LLP. The Apollo Funds were legally advised by Sidley Austin LLP in the United States and Osler, Hoskin & Harcourt LLP in Canada, while BC Partners’ legal counsel in the United States was Kirkland & Ellis LLP.
This article is based on a press release statement. Further details on the transaction will be available on GFL’s profile on EDGAR and SEDAR+.
In other recent news, Apollo Global Management (NYSE:APO) reported strong preliminary financial results for Q4 of 2024, with an estimated pre-tax alternative net investment income of approximately $265 million. This performance is expected to yield an estimated 9% annualized return on alternative net investments. The firm has also awarded its CFO, Martin Kelly, restricted stock units valued at $10 million, aligning executive compensation with the company’s financial goals. Furthermore, Apollo has amended its insider trading policy to allow senior executives to engage in prepaid variable forward contracts involving the company’s shares.
Victory Capital Holdings (NASDAQ:VCTR) has been highlighted by BMO Capital Markets as a top pick among asset managers with potential for stock buybacks in 2025. The firm has raised its price target for Victory Capital from $71.00 to $78.00, maintaining an Outperform rating. This positive outlook is partly due to the anticipated benefits from Victory Capital’s partnership with European asset management giant, Amundi.
Scott Merkle of SLB Capital Advisors has suggested that the anticipated Federal Reserve rate cut is expected to benefit the private equity market, including firms like Apollo Global Management, by providing favorable financing conditions for leveraged buyouts.
These are all recent developments that investors should consider.
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