A $5B GIP sale could fuel an aggressive redeployment cycle for GFL
Rumours around the potential for GFL Environmental (GFL) to divest its infrastructure business (GIP) have gained steam, following management’s indication that inbound interest after its Environmental Services sale could lead to a monetization event.
That is something we are exploring about a potential monetization event for GIP, but we are not sellers of the whole business, we would potentially sell some part.
The price tag floating around the street is $5B, which would represent 16-17x this year’s EBITDA forecast…
So we’ll be exiting this year with a $300 plus million EBITDA number, and there’s still a fairly good backlog of M&A opportunities.
… in-line with where it currently trades and the multiple on the $8B divestiture of its Environmental Services segment in January.
That divestiture earlier this year allowed GFL to bring its leverage profile much closer to peers, which had been the primary source of concern for investors.
Given that the company intends to stay in the low-3s net debt / EBITDA, any capital from a potential sale would likely get redeployed into M&A, which had slowed down in recent years in an effort to obtain a better credit rating.
With over $500M in cash, a conservative guide that sits above 2024’s M&A deployment total (no GIP sale included)…
If you recall at Investor Day, we highlighted the ability to deploy between $700 million and $900 million on M&A conservatively. Given the current pipeline, we should meet or exceed the high end of these estimates.
… and a constructive outlook for tuck-in transactions…
Our pipeline continues to remain robust, and we see many opportunities to densify our networks and improve asset utilization through tuck-in M&A across our existing footprint.
… a sale and subsequent redeployment cycle could drive continued margin expansion at GFL, and help close the remaining value-gap to the peer group.
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