UPDATE: March 13, 2020: GFL Environmental confirmed last week's offerings raised nearly $2.2 billion in a new filing this morning. Net proceeds were more than $2.086 billion "after deducting underwriting discounts and commissions and estimated offering expenses." GFL paid off $1.26 billion in debt last week following the completion of these offerings. Proceeds do not include $31.1 million made from shares sold by a separate entity owned and controlled by CEO Patrick Dovigi.
- GFL Environmental reported raising $2.2 billion this week through its initial public offering (IPO) of 17 million subordinate shares at $19 each in both the United States and Canada, along with a concurrent U.S. offering of 15.5 million tangible equity units at $50 each.
- The company also included an overallotment option for both the subordinate shares and equity units, which could potentially bring the total raised to upward of $2.4 billion. A representative confirmed to Waste Dive that is now likely to be exercised in some form and further details will be coming within the next week.
- CEO Patrick Dovigi said the IPO won't change the company's M&A strategy, but "puts our balance sheet in a place where we have the ability to be a little bit more nimble and a little bit more versatile." He declined to comment on questions about whether GFL remains in contention to purchase divestitures from Waste Management's pending acquisition of Advanced Disposal Services.
Canada-based GFL has gotten close to launching an IPO before, first in 2018 and again last fall, before stopping short each time. This latest move came close to being delayed as well due to recent coronavirus-related market turbulence. The company's desired share price has fluctuated throughout – from $20-24 in the fall, to $20-21 last week, to a final $19.
GFL postponed a planned Monday launch by one day to see how the market would fare. Dovigi told Waste Dive that phone calls with a small group of interested investors "gave us the confidence to actually go," because they viewed a new waste stock as a defensible position despite broader market turbulence.
"We had a very good book in the $20 to $21 range," but Dovigi said it was worthwhile "to give $1 to the investors to show some good faith given that they've supported us through the most volatile market that anyone's seen since 2008."
The move appears to have paid off, making GFL likely the third-largest IPO ever launched in Canada and adding it to a small but resilient list of top waste industry stocks.
Dovigi has repeatedly said he was in no rush to go public, making comments to that effect at WasteExpo's investor summit in 2018 following the announcement of a recapitalization and again at the 2019 event where he said the company would "avoid it as long as we possibly could." In that same session, he also recognized it might become "inevitable" due to ongoing expansion.
Yesterday, Dovigi said GFL had now gotten "to a size and scale where it needed to be a public company." He indicated the view that it gets harder to keep recapitalizing large private companies of GFL's size and said this now brings in new investors.
"We're very happy where we ended up," said Dovigi. "We're happy to finally get this behind us and move on to go and run the business now."
The company's filings indicate it will use the proceeds to fully pay off notes due in 2022 and 2023, pay down a little less than half of outstanding notes due in 2026 and 2027, and repay debt in two other categories. In total, this will account for a little more than $1.2 billion, with any remaining proceeds slated for general purposes including future acquisitions. Further debt payments are also a possibility, as GFL still carries a sizable amount to be paid off in the future.
GFL's latest filing notes "there is no probable acquisition that, if completed, would be a significant acquisition," and Dovigi said "we're not going to change how we run the business" in terms of M&A strategy, but further activity would not be surprising. Waste Management has projected it could receive federal regulatory approval by the end of this month with divestiture sales to follow.
GFL has completed 100-plus deals since 2007, including the major 2018 acquisition of Waste Industries, which established its significant presence in the United States. Earlier this year, GFL closed on the purchase of Virginia-based County Waste and Michigan-based American Waste, both of which were in progress prior to the last IPO attempt and required additional funding over the winter. Those two deals, along with other recent tuck-ins, are reportedly worth an estimated $442 million of annual revenue in Canadian dollars.
Beyond any further purchases, another area to watch will be how GFL adapts to heightened expectations for a large publicly-traded environmental services company. For example, Waste Management, Republic Services and Covanta are among those that have either set (or pledged to set) emissions reduction targets. Asked about the topic, Dovigi said the company's first sustainability report would be coming out next month and recycling is still viewed as a growth area.
"It's definitely top of mind and given the founding of the business around ESG-related initiatives – that's the name, Green For Life – you'll see us be a leader in that side of the business as well," he said.
Correction: A previous version of this story miscalculated the approximate debt payments GFL expected to make with its IPO proceeds.