S&P Global Places GFL Environmental On CreditWatch Positive

Ratings actions from Baystreet: http://www.baystreet.ca

(16:59 GMT) GFL Environmental Inc. Price Target Raised to C$80.00/Share From C$75.00 by ATB Capital

Ratings actions from Baystreet: http://www.baystreet.ca

Financial stocks fell in late Tuesday afternoon trading with the NYSE Financial Index easing and the Financial Select Sector SPDR Fund (XLF) both shedding 0.4%.

The Philadelphia Housing Index fell 1.4%, and the Real Estate Select Sector SPDR Fund (XLRE) dropped 0.9%.

Bitcoin (BTC/USD) declined 5.8% to $96,324, while the yield on 10-year US Treasuries advanced 4.8 basis points to 4.684%.

In economic news, US job openings rose to 8.098 million in November, according to the Bureau of Labor Statistics, above the 7.74 million openings expected in a survey compiled by Bloomberg.

The Institute for Supply Management's US services index rose to 54.1 in December from 52.1 in November, compared with expectations for a smaller increase to a 53.5 in a survey compiled by Bloomberg.

In corporate news, Cushman & Wakefield , Camden Property Trust and Blackstone's LivCor are among landlords facing a lawsuit filed by the US Department of Justice for allegedly participating in an algorithmic pricing scheme. Cushman shares fell 4.1%, Camden dropped 2.5%, and Blackstone shed 2.2%.

Blackstone-managed private equity funds agreed to buy a stake in Citrin Cooperman Advisors from private equity firm New Mountain Capital for an undisclosed price.

GFL Environmental agreed to sell a majority stake in its environmental services business to funds managed by affiliates of Apollo Global Management and BC Partners for 8 billion Canadian dollars ($5.59 billion). Apollo shares fell 4%, and GFL shed 1.3%.

Ryan Specialty Holdings agreed to buy Velocity Risk Underwriters from funds managed by Oaktree Capital Management for $525 million in upfront cash, subject to adjustments. Ryan shares declined 1.7%.

Financial stocks rose in Tuesday afternoon trading with the NYSE Financial Index up 0.3% and the Financial Select Sector SPDR Fund (XLF) gaining 0.2%.

The Philadelphia Housing Index fell 0.8%, and the Real Estate Select Sector SPDR Fund (XLRE) dropped 0.5%.

Bitcoin (BTC/USD) declined 5% to $97,121, and the yield for 10-year US Treasuries advanced 6.1 basis points to 4.679%.

In economic news, US job openings rose to 8.098 million in November, according to the Bureau of Labor Statistics, above the 7.74 million openings expected in a survey compiled by Bloomberg.

The Institute for Supply Management's US services index rose to 54.1 in December from 52.1 in November, compared with expectations for a smaller increase to a 53.5 in a survey compiled by Bloomberg.

In corporate news, GFL Environmental agreed to sell a majority stake in its environmental services business to funds managed by affiliates of Apollo Global Management and BC Partners for 8 billion Canadian dollars ($5.59 billion). Apollo shares fell 2.8%, and GFL shed 1.8%.

Ryan Specialty Holdings agreed to buy Velocity Risk Underwriters from funds managed by Oaktree Capital Management for $525 million in upfront cash, subject to adjustments. Ryan shares fell 1.1%.

Paychex agreed to buy Paycor HCM for $4.1 billion in cash. Paychex shares gained 2.6%, and Paycor fell 3%.

GFL Environmental said Tuesday it has entered into an agreement to sell its Environmental Services division at an enterprise value of $8 billion to Apollo Funds and BC Partners. National Bank is positive on the deal.

GFL will retain a $1.7 billion equity interest in the business and expects to realize cash proceeds of ~$6.2 billion. The company will retain a 44% equity interest and the Apollo Funds and BC Partners will each hold a 28% equity interest. GFL will also maintain an option to repurchase the ES business within five years of closing.

The transaction is expected to close in the first quarter, subject to customary closing conditions.

With the proceeds of the sale, GFL plans to use up to $3.75 billion ($3.5 billion initially guided) to pay down some of its debt. The remaining $2.25 billion is expected to be used for share buybacks and general corporate purposes.

An asset sell-down and deleveraging should support future growth, with GFL continuing to invest in high-return RNG and EPR infrastructure ($250-300 million invested in 2024) and M&A ($600-650 million target for 2024). Following the sale, National Bank expects 2025 to be a busy year for accretive tuck-in M&A. The transaction allows GFL to maintain its synergies between the Environmental Services business and the Solid Waste businesses, preserving future opportunities for its remaining operations. The maintained equity interest is an added bonus to GFL's initial guidance, enabling it to participate in the continued value creation and growth from these assets.

Bottom line: "We view the deal positively, with an accretive sale price that is in line with recent transactions. GFL's valuation has closed the gap with is larger peers (now at 14.1x 2025E), though with lower debt and an improved outlook for growth, it could continue to outperform."

GFL is rated Outperform, with a $70 target.

Truist Securities has trimmed their '25 and '26 revenue and EPS estimates for GFL Environmental to better-align with prior management comments and weaker recycled commodity pricing.

In the Jan. 6 note, Truist said it viewed GFL's vesting of its environmental services (ES) segment for $8 billion favourably. "We think the reported valuation at CAD ~$8B (or we estimate ~$7B on a post-tax basis) of ~16x '25E EBITDA is a positive outcome for shareholders." GFL announced today that it was divesting the unit for $8 billion.

Lowering 2025E revenue to $8.25 billion (prior: $8.26 billion) and maintain adj. EPS at $1.30.Truist has also trimmed 2026 revenue to $8.64 billion (prior: $8.66 billion) and adj. EPS at $1.48. (The model still includes the ES segment).

GFS is rated Buy, with a US$54 target.

GFL Environmental on Tuesday said it is selling its environmental services business for an enterprise value of $8 billion to Apollo Funds and BC Partners.

GFL will retain a 44% stake in the business while Apollo Funds and BC Funds will each hold a 28% stake. The transaction is expected to close in the first quarter.

The company also expects to realize $6.2 billion cash proceeds, net of the retained equity and taxes. Of this, $3.75 billion will be used to pay down debt, with the rest going to share repurchases and general corporate purposes. The debt repayment is expected to cut its annualized cash interest expense by $200 million, GFL said.

"The sale of our Environmental Services business at an enterprise value of $8.0 billion is substantially above our initial expectations and is a testament to the quality of the business that we have built," said Patrick Dovigi, Founder and Chief Executive Officer of GFL. "The transaction will allow us to materially delever our balance sheet which will accelerate our path to an investment grade credit rating. A deleveraged balance sheet will provide ultimate financial flexibility to deploy incremental capital into organic growth initiatives and solid waste M&A and allow for a greater return of capital to shareholders through opportunistic share repurchases and dividend increases, while maintaining a targeted Net Leverage in the low 3's."

GFL was last seen up $1.69, to $64.78, on the Toronto Stock Exchange.