UPDATE: Nov. 6, 2019: GFL Environmental canceled its IPO plans yesterday, as first reported by The Globe and Mail.
Reports indicate banks behind the deal were only finding support for $18 per share (as opposed to the proposed $20-24 per share) which the company didn't consider to be "fair value." GFL's high debt load and recent string of net losses, amid a period of expansion through acquisitions, were said to be factors. Bloomberg reports Canadian investors were raising more concerns than those in the U.S.
Asked whether the company still planned to sustain its rapid M&A pace, CEO Patrick Dovigi wrote to Waste Dive: "Of course. Nothing (is) going to change. We are very well capitalized and have partners that want to continue giving us equity as we need to continue growing the business."
- GFL Environmental has filed plans to launch its initial public offering, aiming to raise more than $2.4 billion. The Canadian company plans to start with nearly 87.6 million subordinate shares at $20-24 each. Underwriters will have the potential to sell as many as 100.7 million shares based on interest.
- GFL estimates its proceeds from the initial offering will be $1.831 billion (based on a midpoint of $22 per share and deducting all expenses). If underwriters sell the full amount of shares, that number could reach $2.11 billion. CEO Patrick Dovigi could also net an additional $22.8 million from shares being sold by an entity he owns.
- The company's proceeds will be used to pay down debt on an estimated $800 million in principal across multiple notes, plus interest, premiums and related fees. GFL plans to use any remaining funds "for general corporate purposes, including future acquisitions."
GFL's rapid rise since 2007 has been of great interest to industry players. It now employs more than 9,500 people and is the fourth-largest North American service provider. Following a period of exponential growth, GFL previously considered an IPO in 2017. Instead, BC Partners and Ontario Teachers’ Pension Plan bought out private equity backers (including Macquarie Infrastructure Partners) in a 2018 restructuring deal.
While GFL often touts its diversification across solid waste, liquid waste and soil remediation as a differentiating factor, solid waste still accounted for an estimated 77% of the company's pro forma revenue last year. As of Dec. 31, 2018, GFL reported owning more than 100 collection operations, 60-plus transfer stations, 47 landfills, 29 MRFs and nine organics processing facilities.
GFL reported revenues of 1.55 billion Canadian dollars for the first half of 2019, but also had approximately CA$6.68 billion of indebtedness outstanding through that same period. This debt level and the company's string of net losses (CA$161.4 million so far this year) have been lingering questions for some investors. And even if GFL can pay down as much debt as it hopes to through the IPO, it seems the company's plans for further expansion may add to that amount.
"While we expect we will be able to fund some of our acquisitions and capital expenditures with our existing resources, we will likely require additional financing, including debt, to pursue certain acquisitions," said GFL in its latest filing.
The company has completed more than 100 acquisitions to date, including last year's major purchase of North Carolina-based Waste Industries. So far this year GFL has done 21 tuck-in deals, including seven in the U.S. In May, CFO Luke Pelosi told Waste Dive he anticipates GFL will go down in industry history as "one of the largest players in the continent that came from very little" and said the company feels like it's "just getting started."
If successful, this IPO is expected to be the largest Canada has seen in decades. It will also be much larger than anything the North American waste industry has experienced in recent memory. Advanced Disposal Services' 2016 IPO yielded an estimated $346 million, based on an $18 share price. Now, pending federal regulatory approval, Advanced is set to be acquired by Waste Management. If all goes according to plan, the former fourth-largest U.S. player's symbol may come off the market not too far from when GFL's is added.
GFL's subordinate shares have been approved for listing on the New York Stock Exchange and are pending approval by the Toronto Stock Exchange. All shares will be traded under the symbol "GFL."