GFL Environmental (GFL.TO)(GLF) CEO and founder Patrick Dovigi says his Toronto-based waste administration firm is being undervalued as analysts muse about potential buyout situations.
“What is very clear is the company has many options, and all are pointing to the fact that the company is significantly undervalued based on the value of our assets,” Dovigi instructed Yahoo Finance Canada in an electronic mail on Wednesday.
GFL’s destiny has been an open query for the reason that Globe and Mail newspaper and monetary information outlet CFTN reported final month that the corporate is entertaining a number of presents from personal fairness and infrastructure funds, citing unnamed sources.
In response to the Globe, one provide from a consortium of buyers is for GFL’s complete enterprise. One other reportedly targets its environmental companies division, with the customer agreeing to pay about 15 occasions the unit’s earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA). In response to GFL’s monetary filings, the unit earned adjusted EBITDA of $383 million in 2023.
The discussions are reported to be in preliminary phases, and subsequently might not result in a transaction.
GFL’s Toronto-listed shares are up about 25 per cent since early June, and have hit all-time highs in current weeks as buyers anticipate offers. Previous to that, considerations in regards to the firm’s debt load had weighed on the inventory.
“We believe there is significant optimism for the potential sale of the environmental services division already reflected in the stock,” BMO Capital Markets analyst Devin Dodge wrote in a current be aware to purchasers. “Should a transaction not materialize, we suspect the stock could give back some of its recent gains.”
He downgraded his score to “market perform” from “outperform,” with a $42 value goal on New York-listed shares.
In earlier analysis, Dodge outlined 4 potential situations for GFL, starting from a full sale of the enterprise, to doing nothing in any respect. Citing current conferences with firm administration, he sees a bunch of personal fairness and sovereign wealth funds displacing present shareholders because the “most likely outcome.”
“If a consortium of new ownership displaced the current private equity ownership, this would allow an expedited exit for BC Partners, Ontario Teachers’ Pension Plan & GIC, while also pushing out further private equity-related sell-downs another three to five years,” Dodge wrote.
He added {that a} potential sale of GFL’s environmental companies unit “appears to be in the early innings.”
On Wednesday, Dovigi rebuffed these conclusions.
“I am not sure Mr. Dodge is in any position to comment on the likelihood of any outcome, as he has never spoken to me,” he wrote within the electronic mail.
In a be aware to purchasers final month, RBC Capital Markets analyst Sabahat Khan stated a possible sale of GFL’s environmental companies enterprise would serve the twin goal of decreasing the corporate’s debt load, whereas releasing up capital to develop its strong waste enterprise.
“We are not entirely surprised that GFL is receiving buyout interest,” Khan wrote. “At a high level, we think private buyers looking to acquire waste businesses with leverage would find this cash-generation profile attractive.”
Toronto-listed shares fell lower than one per cent to $52.44 as at 11:35 a.m. ET.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Comply with him on Twitter @jefflagerquist.
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