GFL Environmental cancels IPO after investors seek price below range

TORONTO — GFL Environmental Inc. is cancelling its initial public offering, which was expected to raise upwards of US$2.4 billion, after investors proposed pricing below its desired range.

The Vaughan, Ont.-based waste management company in October had launched its IPO priced at between US$20 and US$24 per share.

“The existing shareholders determined that the proposed pricing offered in the IPO at 18.00 it did not represent fair value for the company and therefore have elected to revisit the public markets at a later date,” GFL chief executive Patrick Dovigi said in an emailed statement.

GFL provides non-hazardous solid waste management, infrastructure and soil remediation and liquid waste management services in Canada and 23 U.S. states.

It says it is the fourth-largest North American diversified environmental services company and has a workforce of more than 10,000 employees. GFL says it serves more than 135,000 commercial and industrial customers and provides solid waste collection services to more than four million households.

GFL’s principal shareholders include BC Partners and the Ontario Teachers’ Pension Plan.

Since GFL was founded in 2007 by Dovigi, a former professional hockey player who was drafted by the Edmonton Oilers, the company has grown significantly.

Its strategy involves being a “consolidator of choice” in a fragmented market, GFL said in its investor presentation in October. In turn, it benefits from increased operational efficiency from economies of scale, GFL added.

Since 2007, the company has made 109 acquisitions, and closed at least 22 in 2019 alone, it said in an investor presentation. In September, GFL said it acquired the Windsor Disposal Services Group of companies. A month prior, the company acquired the Vancouver Island solid waste operations of Evergreen Industries Ltd., part of the Alpine Group.

However, the company also has approximately $6.68 billion in debt as of June 30, according to GFL’s restated preliminary prospectus from Oct. 23.

“While we expect we will be able to fund some of our acquisitions and capital expenditures with our existing resources, we will likely require additional financing, including debt, to pursue certain acquisitions,”the company said.

GFL’s IPO was highly anticipated, and would have been among the biggest in Canada in several years.

With up to 100.7 million subordinate voting shares planned, the IPO was expected to raise as much as US$2.42 billion. At the time, GFL said the IPO was expected to close the week of Nov. 11, subject to customary closing conditions.

Hydro One’s IPO in 2015 raised an estimated $1.66 billion. Sun Life Financial’s IPO in 2000 raised $1.8 billion while Manulife Financial went public for $2.49 billion in 1999.

GFL’s decision to hold off comes after a sluggish third-quarter for Canadian IPOs.

A recent PwC Canada report said there wasn’t a single new issue on the TSX in the third quarter, and the Canadian market for initial public offerings fell further behind the pace of last year.

“Year-to-date, 31 IPOs with a value of $646 million reached the market in the first three quarters of 2019, compared to the 32 new issues that raised $1.9 billion in the same period of 2018,” the consultancy said in October.

Concerns over global trade tensions and market volatility were factors, PwC Canada said, but noted there were offerings in the pipeline for the fourth quarter.

GFL said in October it had been approved for listing on the New York Stock Exchange and it had applied to list its subordinate voting shares on the Toronto Stock Exchange, both under the symbol GFL.

GFL has said that the proceeds of the IPO would “repay certain indebtedness and general corporate purposes, including future acquisitions.”

In its investor presentation, GFL said its business was “recession resilient.”

“Waste collection is non-discretionary, making it less sensitive to cyclical economic trends.”

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