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The Competition Bureau is challenging GFL Environmental Inc.’s $927-million acquisition of Terrapure Environmental Inc. over concerns about the consolidation of waste management services in Western Canada.

The bureau, which assesses mergers and acquisitions, said in a press release that it is objecting to the transaction, which closed in August, because it has “likely substantially lessened” competition in oil recycling services (ORS) and industrial waste services (IWS) in parts of British Columbia, Alberta and Saskatchewan.

“Prior to the transaction, Terrapure was GFL’s closest competitor in many IWS and ORS markets in Western Canada,” it said. “A bureau review found that the elimination of this rivalry is likely to result in increased prices and reduced service quality for customers.”

The Competition Bureau said it has filed an application to the Competition Tribunal – the agency that adjudicates competition matters – for a court order requiring GFL to sell any assets that substantially reduce competition in Western Canada. The bureau’s challenge comes at a time when the highly fragmented North American waste-management sector has been consolidating.

In March, GFL announced the deal to acquire all of Terrapure’s assets except for its battery recycling business. At the time, GFL chief executive officer Patrick Dovigi said the purchase would allow GFL to expand into other regions where Terrapure operates, such as Atlantic Canada. When the deal was struck, the company said that the acquisition would generate $45-million in adjusted annual net income.

In a statement, GFL said it “intends to work co-operatively with the Competition Bureau to resolve this matter.” Shares of GFL on the Toronto Stock Exchange dipped 3.5 per cent on Wednesday at midday trading.

“We see the news today ... as having a fundamentally neutral impact,” RBC Dominion Securities Inc. analyst Walter Spracklin wrote in a note on Wednesday. GFL said in its statement that the locations identified by the bureau generate approximately $30-million in annual revenue, which is a fraction of the revenue it expects Terrapure to earn.

“GFL expected Terrapure to generate $375-[million] in revenues this year, with total potential remedies representing 8 per cent or less of the acquired total,” Mr. Spracklin wrote, referring to the costs expected to be incurred to satisfy the Competition Bureau.

“Second, we do not see the Competition Bureau’s announcement today as indicative of a longer-term regulatory headwind on GFL’s ability to close future deals.”

The Terrapure deal is one of dozens that GFL has completed this year. In October, the company said it had made 31 acquisitions year-to-date, deploying approximately $2-billion.

The bureau is challenging another transaction in the waste management industry that has already closed. It is seeking to undo Secure Energy Services Inc.’s $478-million acquisition of Tervita Corp. The bureau argued that consolidation of the two Calgary-based large waste-management services firms, which serve oil and gas companies in Western Canada, would harm customers, who would likely pay higher prices.

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