GFL Environmental stock price falls as waste company shuts down strategic review

GFL Environmental Inc. GFL-T share price dropped sharply after the waste disposal company formally shut down a review of unsolicited takeover offers and opted to remain public.

Early Tuesday, the price of GFL shares fell around 10 per cent at US$41.36 in early trading on the New York Stock Exchange.

The decline came after the company said in a press release a special committee of its board concluded a four-month negotiation with potential private equity buyers and “unanimously determined that remaining a public company is the best path forward for all shareholders.”

On Monday, The Globe and Mail reported GFL’s special committee turned down bids for US$52 per share from a consortium of Wall Street private equity fund managers. The offer valued GFL at US$22-billion and would have been one of the largest take-private transactions seen in Canadian markets.

“The special committee concluded that while the range of valuations proposed were based on a premium to where GFL currently trades, that is not reflective of the full value of our standalone strategy,” said Dino Chiesa, chair of the special committee, in a press release on Tuesday.

“The board is unanimous in its conviction that GFL’s standalone growth plans offer far superior risk-adjusted returns for shareholders,” said Mr. Chiesa. “We remain open to considering any proposal that is in the best interests of shareholders.”

GFL was founded in Vaughan, Ont., in 2007 by entrepreneur and current chief executive officer Patrick Dovigi, who built a company known for its bright green garbage trucks through a series of takeovers. It is now headquartered in Miami.

Analysts said GFL’s decision to end the review without a sale of the company should have a relatively small medium to long-term impact on the stock price.

“While the potential ‘no deal’ outcome could drive some downside to shares tomorrow, we have been pointing investors to the recent run-up in waste sector valuations that should moderate the potential downside from here,” said analyst Sabahat Khan at RBC Capital Markets in a report on Tuesday.

Mr. Khan and other analysts predicted GFL would turn down offers if the board decided they undervalued the company. There are 17 investment-bank analysts who cover GFL, and 15 predict that its stock will be worth north of US$50 in a year’s time. Their price targets range up to US$64 per share.

In July, GFL launched a review after receiving what Mr. Dovigi called “unsolicited preliminary expressions of interest from multiple parties to take the company private.”

GFL’s share price had dropped sharply earlier in the year after the company launched a friendly $5.4-billion takeover of Calgary-based Secure Waste Infrastructure Corp. At least two private equity fund managers approached GFL with take-private offers that would value the company at more than US$20-billion.

On Tuesday, Mr. Dovigi said in a release: “The company has never had a better outlook.”

Private equity funder BC Partners owns a 13 per cent stake in GLF, and several other asset managers owns stakes in the company and its subsidiaries. GFL is looking at options that allow its major investors to sell all or some of their holdings.

“While the special committee has concluded its process, we understand that certain parties remain interested in acquiring some or all of the stakes held by our financial sponsor shareholders and we will facilitate that process as required,” said Mr. Dovigi.