GFL Environmental Inc., Ontario, announced June 24 that it has entered into a definitive agreement to purchase substantially all of the divestiture assets expected to result from the previously announced acquisition of Ponte Vedra, Florida-based Advanced Disposal Services Inc. by a wholly owned subsidiary of Houston-based Waste Management Inc. The acquisition includes vertically integrated solid waste collection, transfer, recycling and disposal assets for an aggregate purchase price of $835 million.
The assets to be acquired by the company include 32 collection operations, 36 transfer stations and 18 landfills supported by 380 collection vehicles across 10 U.S. states. The acquired assets are expected to generate annualized revenue of approximately $345 million, according to the company.
Strategic benefits of the acquisition
GFL says the acquired assets are expected to support its continued organic growth extending its reach into new and adjacent markets and forming a base to pursue synergistic tuck-in acquisitions. GFL expects that the acquisition will significantly expand its U.S. footprint while creating an opportunity to realize meaningful synergies and earnings accretion. Additionally, the company says the acquisition is expected to:
- Expand its geographical reach. GFL says the acquisition provides it with an opportunity to extend its geographical reach into the Midwest through a network of vertically integrated assets with a strong regional market presence in Wisconsin.
- Provide a complementary asset network. GFL says the acquisition brings a high-quality, complementary asset network and customer base to GFL's existing operations in Michigan, Georgia, Alabama and Pennsylvania.
- Improve operating margins. WM and GFL will enter into a reciprocal 5-year disposal arrangement that will provide the company with competitive, stable and predictable pricing and disposal terms.
- Create long-term shareholder value. GFL says the acquisition reinforces the company's goal of creating long-term equity value for shareholders. The portfolio of acquired assets coupled with the experienced management team joining GFL are expected to be immediately accretive to free cash flow and provide opportunities for the company to continue to pursue its growth strategy.
"Even during these unprecedented times, we continue to successfully execute on our growth strategy of pursuing strategic and accretive acquisitions. This transaction presents GFL with a unique opportunity to significantly expand our U.S. footprint through the acquisition of a high-quality, vertically integrated set of assets in both our existing and adjacent fast-growing U.S. markets," Patrick Dovigi, founder and CEO of GFL, says. "We are excited to welcome over 900 employees of WM and ADS to the GFL family and are confident that we will continue to offer excellent customer service to our expanded customer base."
Timing and approvals
The acquisition is subject to certain customary closing conditions, including approval by the U.S. Department of Justice and the closing of the Waste Management and Advanced Disposal transaction. The acquisition is not subject to any financing conditions. Closing is expected to occur in the third quarter following the Waste Management and Advanced Disposal transaction.
Financing of the acquisition
GFL says it is well-positioned to fund the acquisition with its strong balance sheet and proven access to capital markets. The company currently anticipates funding the acquisition using a combination of capacity under its revolving credit facility and cash on hand, but will evaluate other longer-term strategic and opportunistic financing opportunities as they present themselves. Following completion of the acquisition, GFL expects to maintain its current credit rating profile and leverage within previously stated ranges.