GFL buys Calgary-based Secure Waste for $5.4-billion to expand in industrial services and infrastructure
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GFL workers collect recycling outside homes in Toronto. The company is expanding its footprint in Western Canada with the purchase of Secure Waste Infrastructure.Cole Burston/The Globe and Mail
GFL Environmental Inc. GFL-T is buying Calgary-based Secure Waste Infrastructure Corp. SES-T for $5.4-billion, expanding its footprint in Western Canada and diversifying its municipal waste management business by adding more industrial and oil field revenue.
GFL is paying $24.75 per share for Secure, a 16-per-cent premium to the target’s last closing price. GFL will mostly use shares to pay for the deal, with Secure agreeing to receive a split of 80-per-cent stock and 20-per-cent cash.
If the transaction is approved, Secure shareholders will own 16 per cent of the combined company.
From its founding in 2007, GFL has expanded aggressively through acquisitions in Canada and the United States and now has more than 270 deals under its belt. The company services hundreds of municipalities across the two countries and has a market value around $22-billion on the Toronto Stock Exchange.
Historically, Secure was a Canadian energy services company, but it has repositioned itself over the last five years. The company operates in Western Canada and North Dakota and generates 85 per cent of its revenue from industrial waste management, which includes the processing, recovery and disposal of waste generated by energy and industrial companies.
The remaining 15 per cent of its revenue comes from operating energy infrastructure, which includes running crude oil terminals and storage facilities.
Secure’s shares have been on a tear throughout its repositioning, with the stock up 430 per cent over the last five years, and during this time Secure has merged with Tervita, divested some non-core oil field services business and acquired four metals recycling businesses.
Because Secure’s shares have performed so well, GFL is buying the company at an elevated premium, with the purchase price amounting to roughly 25.5 times Secure’s earnings, according to analyst Ian Gillies at Stifel.
“SECURE’s business has become significantly more resilient over the last five-years and is more akin to its residential and industrial waste peers,” Mr. Gillies wrote in a note to clients.
GFL, meanwhile, was on a tear for its first few years as a public company. (The waste giant listed on the Toronto Stock Exchange in March, 2020.) Over the last year, however, GFL’s shares have dropped 12 per cent amid a sell-off in the municipal waste sector.
GFL’s bid must be approved by Secure’s shareholders. Two investors that collectively own 20 per cent of Secure – Angelo, Gordon & Co. LP and Solus Alternative Asset Management LP – have already agreed to vote in favour of the transaction.
