(Bloomberg) -- Apollo Global Management Inc. and BC Partners agreed to acquire a controlling stake in GFL Environmental Inc.’s environmental services unit, in a deal that values the business at C$8 billion ($5.6 billion) including debt.
The consortium is set to buy a 56% stake in the business, while GFL will own the remainder with an option to repurchase from Apollo and BC Partners within five years, according to a statement on Tuesday that confirmed an earlier Bloomberg News report. The transaction is expected to close in the first quarter.
The stake sale will generate about C$6.2 billion in cash proceeds for GFL, which plans to use as much as C$3.75 billion for debt repayment and as much as C$2.25 billion for share repurchases.
GFL has become one of North America’s largest waste management companies in recent years by rapidly acquiring rivals. The debt used to finance that growth has become a concern for investors, prompting the company to begin looking for buyers for less profitable businesses. In November, GFL said it received interest from several buyers for its environmental services business and might sign a deal by early 2025.
“The transaction will allow us to materially delever our balance sheet which will accelerate our path to an investment grade credit rating,” Patrick Dovigi, GFL’s founder and chief executive officer, said in the statement. The repayment of debt is expected to reduce the firm’s annualized cash interest expense by roughly C$200 million, he added.
Vaughan, Ontario-based GFL offers services in solid waste and liquid waste management as well as soil remediation in Canada and the US, according to its website. The company employs more than 20,000 people. In 2018, a BC Partners-led consortium invested in GFL in a deal that valued the Canadian firm at $5.1 billion including debt. Ontario Teachers’ Pension Plan was among the investors and Dovigi maintained his role as CEO and significant ownership in the firm.
Shares of GFL have risen 33% in the past year in New York, giving the company a market value of about $17 billion. The environmental services unit generated about C$1.7 billion in revenue last year and more than C$500 million in earnings before interest, taxes, depreciation and amortization, people familiar with the matter have said.
BC Partners has been active in Canada recently, agreeing to sell GardaWorld late last year in a deal valuing the security services firm at about C$13.5 billion.
Brown Gibbons Lang & Co. and JPMorgan Chase & Co. advised GFL on the deal, while Canaccord Genuity Corp. served as independent financial advisor to the special committee of GFL directors.
(Updates throughout with confirmation.)
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