Ontario Teachers’ Pension Plan part of new GFL Environmental investor group

TORONTO – GFL Environmental Inc. is getting new investors including the Ontario Teachers’ Pension Plan and private equity firm BC Partners in a deal that values the waste-management company at about $5.125 billion.

Under the agreement, GFL founder and chief executive Patrick Dovigi will maintain his role and leadership of the Toronto-based private company as well as a significant ownership stake.

“Having founded the company, it was very important to me to find partners that shared the same principles, values and vision, along with having significant capital to fund our ambitious growth plans,” Dovigi said in a statement.

Financial details of the transaction weren’t disclosed.

The BC Partners-led investor group, which has worked with other Canadian pension plans in the past, will acquire the interests of funds managed or associated with HPS Investment Partners, Macquarie Infrastructure Partners III and Hawthorn Equity Partners.

HPS Investment Partners acquired a non-controlling interest in GFL in November 2014. The Macquarie fund became an equity investor in GFL in February 2016 when GFL bought the Matrec solid waste business from Montreal-based Transforce, now called TFI International.

“We think there are more and more opportunities to continue the geographic expansion, both in Canada — really coast-to-coast — but also select markets in the U.S.,” said Paolo Notarnicola, a senior partner at BC Partners, who led the investment.

BC Partners typically invests in “defensive growth” opportunities that includes resilient market sectors plus the potential for mergers or acquisitions and organic growth of the underlying business, he said.

In the GFL situation, there will likely be an initial public offering in a few years that will provides BC Partners with a gradual exist from the company — but only time will tell which route the management and investors will decide to take, Notarnicola said.

There had been an unconfirmed report in January that GFL had hired advisers to lead an initial public offering, which would have sold GFL shares to be listed on a stock exchange.

Ontario Teachers’ didn’t respond to requests for comment Monday.

The transaction is expected to close by June 30, subject to customary closing conditions.

GFL has more than 5,000 employees and provides local services to more than 2.5 million households under municipal contracts and to more than 60,000 industrial, commercial and institutional customers.

A report by Moody’s Investor Services in February indicated GFL had about $1.35 billion of revenue last year, with 72 per cent coming from solid waste management, 17 per cent from soil remediation and 11 per cent from liquid waste.

Canadian markets accounted for 80 per cent of GFL’s revenue, with 20 per cent from the United States, Moody’s said.

Moody’s also said at the time that GFL’s long-term debt rating was B2, which is below investment-grade, with a negative outlook — mostly because of its high debt-ratio.

On the other hand, Moody’s said GFL has a well-diversified business with margins comparable to its peers.