Canadian waste-management giant GFL Environmental Inc. is on the cusp of relaunching an initial public offering after its first attempt failed, with plans to raise $3-billion after encouraging meetings with potential investors.
GFL originally tried to go public last fall, but pulled the deal after investors balked at its heavy debt load. The transaction was set to raise as much as US$2.4-billion, which would have made it one of the largest in Canadian history.
Only three months later, GFL feels confident enough to test the public markets again, according to a source familiar with the deal, and the company is aiming to relaunch its IPO the week of Feb. 24. The Globe is not identifying the source because they were not authorized to speak publicly.
GFL declined to comment.
Hot markets are serving as a tailwind for the potential IPO. Since the original attempt in November, the S&P 500 is up 10 per cent and the S&P/TSX Composite Index has climbed 7 per cent higher.
Crucially, rival waste-management companies Waste Connections, Republic Services and Waste Management have seen their share prices jump 15 per cent, on average, over the same time frame.
Despite the recent gains, there are no guarantees that GFL will relaunch its IPO. A major sticking point, according to the source, is the potential for market volatility emanating from any sudden shocks caused by the coronavirus outbreak. If its IPO is revived, GFL plans to sell shares to public investors in Canada and the United States once again.
GFL has made some significant changes since its last attempt to go public. In mid-December, the company raised $1.4-billion in private markets to fuel more acquisitions. The fresh funds came in the form of US$775-million worth of new debt and $300-million in new equity from its private backers. BC Partners and the private capital arm of Ontario Teachers’ Pension Plan are the company’s largest owners.
GFL used the cash to repay $300-million of existing debt and to fund the acquisition of County Waste of Virginia for $642-million. The company also said at the time the remaining proceeds would be temporarily parked as cash on its balance sheet, providing funds for future deals.
Acquisitions have been central to GFL’s business strategy since its inception in 2007. Over 13 years, the company has purchased more than 100 companies as it consolidated a fragmented industry, becoming the fourth-largest waste-management company in North America.
GFL first publicly floated the idea of going public roughly three years ago, yet in 2018, the company agreed to a $5-billion leveraged buyout that made BC Partners and Teachers’ its largest owners.
When GFL attempted to go public last year, the company said it would use some of its IPO proceeds to repay a portion of its debt, which has accumulated largely through its 2018 buyout and through its serial acquisitions. The interest payments from this debt led to a cumulative loss of $737-million between fiscal years 2016 and 2018, as well as a $161-million loss in the first six months of fiscal 2019.
GFL tried to sell a fixed number of shares in the fall, which meant the company needed to price its IPO between US$20 and US$24 a share in order to lower its debt burden to less than four times its adjusted earnings before interest, taxes, depreciation and amortization. Investors ultimately balked at that price range.
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