Macquarie Infrastructure and Real Assets (MIRA), New York, via Macquarie Infrastructure Partners II (MIP II), announced Aug. 12 that an agreement has been reached to sell Houston-based WCA Waste Corp. to Ontario-based GFL Environmental Inc. MIP II is a closed-end fund that is nearing the end of its fund term.
GFL reports that it will acquire WCA and its subsidiaries for an aggregate purchase price of $1.21 billion. The purchase price for the acquisition will be financed in part with the net proceeds of a private placement of $600 million of equity and through a combination of cash on hand and capacity under the company's revolving credit facility.
Founded in 2000, WCA provides solid waste collection, transfer, disposal and recycling services across 11 states. WCA currently operates a network of solid waste assets, including 37 collection and hauling operations, 27 transfer stations, three material recovery facilities and 22 landfills supported by more than 1,000 collection vehicles. WCA has an established regional platform with a growing footprint across the Midwest and Southeast, including three key markets in Texas, Missouri and Florida. The company generates annualized revenue of approximately $400 million.
MIP II acquired WCA through a take-private transaction in 2012 and since has supported WCA’s growth and operational improvements. Over the course of MIP II’s ownership, WCA executed on a business plan including the strategic divestiture of noncore assets to allow redeployment of capital to accretive core market opportunities, completing more than 35 acquisitions during MIP II’s ownership.
WCA also has significantly increased its focus on ESG over MIP II’s ownership and in 2018 published its first annual Sustainability Report, comprised of a plan including CNG fleet expansion, leachate management and other initiatives developed in conjunction with MIRA.
“During our approximately eight-year investment, WCA has grown to become one of the leading vertically integrated solid waste companies in the U.S.,” Karl Kuchel, CEO of Macquarie Infrastructure Partners, says. "Working alongside the management team at WCA, we are proud to have supported the company in its mission to provide safer, more efficient and sustainable environmental solutions to its more than 700,000 customers.”
“Today marks a new chapter and a continuation of WCA’s story of growth,” Bill Caesar, CEO of WCA, says. “Over MIP II’s ownership, WCA has grown significantly while also professionalizing the business, investing in people and systems to support our growth and to improve administrative and operational efficiency. I am very grateful to everyone in our WCA family and extraordinarily proud of the company that we have built together.”
According to GFL, the acquisition is expected to support the company’s continued organic growth by further extending its reach into new and adjacent markets and forming a base to pursue synergistic tuck-in acquisitions. GFL expects that the acquisition will expand its U.S. footprint while creating an opportunity to realize meaningful synergies and free cash flow accretion. Additionally, the company says it expects the acquisition to:
- Further expand GFL's geographical reach: The acquisition provides GFL with an attractive opportunity to extend its geographical reach into the Midwest and Southeast, it says, through a network of vertically integrated assets with a strong regional market presence in Texas, Florida and Missouri.
- Provide a complementary asset network: GFL says the acquisition brings a high-quality, complementary asset network and customer base to GFL's existing operations and the divestiture operations to be acquired by GFL from Waste Management Inc., Houston, and Advanced Disposal Services Inc., Ponte Vedra, Florida, in the Southeast.
- 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 WCA's operating margins are expected to be accretive to free cash flow and provide opportunities for the company to continue to pursue its growth strategy, it says.
Following completion of the acquisition of WCA and the divestiture assets from Waste Management and ADS, GFL will operate in nine provinces in Canada and in 27 states in the U.S.
"We continue to deliver on our goal of pursuing strategic and accretive acquisitions to grow our business. The WCA transaction, which we have been working on for over a year, is another example of this commitment. The high-quality, vertically integrated network of assets, together with our recently announced acquisition of certain divestiture assets resulting from the Waste Management and ADS transaction, will complement our existing footprint and provide us with the runway to further expand in the U.S. through tuck-in acquisitions and [will allow us to provide] our suite of environmental services solutions to new customers. We are excited to welcome almost 1,600 employees of WCA to the GFL family," GFL founder and CEO Patrick Dovigi says. "To fund part of the transaction, we will be issuing new equity to [New York-based] HPS Investment Partners LLC, a longstanding partner of GFL, at a premium to market. Their continued support is a testament to their belief in the value proposition of GFL. The new equity will help us maintain our leverage within expected levels."
Dovigi says he expects the integration of WCA’s business to go smoothly for the company.
"Our multidisciplinary integration team has a successful track record of integrating acquisitions like WCA and the Waste Management/ADS divestiture assets,” Dovigi adds. “We have been working on integration preparation of the divestiture assets since earlier this year, which has allowed us to significantly advance our integration plans. We are well-positioned to bring these operations and WCA on board."
“Today's announcement represents a key component of GFL's acquisition plan, which will help further position the company for continued long-term success,” Scot French, co-governing partner of HPS, says. “We look forward to building on our now seven-year partnership with Patrick and his entire team as they continue to execute their growth strategy."
The sale agreement is subject to customary closing conditions including regulatory approval and is expected to reach completion in the fourth quarter of 2020.