- GFL Environmental touted the pending $835 million acquisition of divestiture assets from Waste Management and Advanced Disposal Services as a rare opportunity to accelerate growth in the United States during a morning investor call. CEO Patrick Dovigi described the Wisconsin assets in particular, worth an estimated 60-65% of the package's EBITDA, as a "once-in-a-lifetime opportunity."
- Midwest assets in Wisconsin, Illinois and Minnesota will account for 51% of the package's overall $345 million projected annual revenue. Assets in the East region – defined as Michigan, Indiana, Pennsylvania and Maryland – account for 27%. Southern assets in Georgia, Alabama and Florida comprise the remaining 22%.
- These assets include 18 landfills, three of which have limited capacity but come with "minimal" post-closure liabilities. The company is acquiring 36 transfer stations and more than 350 collection vehicles (the majority of which service commercial routes) and bringing on more than 900 employees. Overall, 56% of the package's estimated revenue comes from hauling, followed by 32% from landfills and 12% from transfer.
Following months of speculation, GFL was confirmed yesterday as the buyer for "substantially all" divestitures required by the U.S. Department of Justice (DOJ) due to market concentration concerns in its review of the larger Waste Management transaction. The majority of these divestitures will come from Advanced. The news also came with a renegotiated price and a newly extended Q3 closure target for the deal to be complete. DOJ prefers a divestiture buyer be lined up in advance, and this announcement provides greater assurance around a process that has already taken longer than others in recent industry memory.
GFL's positive track record with Waste Management, including a 2014 acquisition of the company's Eastern Canada business and prior disposal agreements, was cited as a likely leg up in why it was the successful bidder among other interested parties.
"What we had going for us was number one we have a long relationship with Waste Management, we've worked extremely well together over the years," Dovigi said.
While Waste Management could have theoretically gotten more if certain assets were sold separately, this deal was viewed as the right move overall, Dovigi added. "I think this was a good consolation prize and got them the certainty that they need to do really what was the golden goose for them, which was the bigger deal."
Dovigi said this divestiture transaction compared to its 2014 deal with Waste Management, as well the 2016 acquisition of TransForce's Matrec solid waste division, in terms of scale. The purchase price was described as more favorable than GFL's major 2018 acquisition of Waste Industries, which set it up for rapid growth and made this latest deal possible, according to Dovigi.
Because of that existing footprint, GFL can integrate many of these assets (outside of the Midwest) as tuck-ins to existing operations. CFO Luke Pelosi noted this effort (which Dovigi hopes could begin as soon as August) will be "very efficient" since GFL uses the same operating platform as Advanced. Because the divestiture process means certain operations will come in partial form — such as hauling operations with fewer trucks or landfills that once internalized company tonnage that may now go elsewhere — GFL can use them as a platform to quickly compete for new business.
"Here we’re really just starting in many instances with the foundation of what could be a fully comprehensive service offering," said Pelosi, describing the potential to build on that as a "very material growth opportunity." Municipal collection and roll-off collection are viewed as key areas for expansion.
The transaction is also viewed as a way to build on the company's inaugural U.S. acquisition of Rizzo Environmental Services in 2016 by vertically integrating that Michigan collection business with a new regional landfill. It also anticipates opportunities to build on the 2018 acquisition of Future Environmental, an Illinois-based liquid waste company, by now expanding into Minnesota and Wisconsin.
Beyond the Wisconsin assets, considered a standalone business of high quality that stems from the founding of Superior Services, GFL outlined similar growth potential in other markets such as Illinois and Indiana. An expansion into Florida, described as a previous goal for the company, can also now begin. Future acquisitions that build off these assets were hinted at, and GFL said it had the financing capacity to do so following a successful initial public offering in March.
Looking ahead, executives said this deal brings GFL more in line with the share of disposal revenue reported by its larger competitors and sets the company up to be a major presence for years to come. The company has long had ambitions to become one of the largest players in the North American industry and increasingly talks about itself among the likes of names viewed as legendary in the sector.
"We're in the company of few that have done this. If you look over the years you had the Laidlaw days which was founded by the DeGrootes, you had the Huizenga days, then you had Ron Mittelstaedt that founded Waste Connections," said Dovigi. "We're the underdog today, but we’ll continue proving that our model is solid and sustainable and we’ll continue growing like everybody else."