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GFL Cancels Biggest Canada IPO After Investors Balk at Price

Scott Deveau and Crystal Tse

(Bloomberg) -- GFL Environmental Inc. was on track to be one of Canada’s largest public offerings. Instead it became the latest IPO that failed to entice investors.

The Vaughan, Ontario-based company scrapped its share sale Tuesday after investors balked at the waste company’s debt load and growth prospects. It had sought to raise as much as $2.1 billion at the top end of its marketed range of $20 and $24 a share. But banks running the IPO only got support for the offering at about $18 a share, according to people familiar with the matter.

“At a price below the range, the shareholders decided it wasn’t fair value,” GFL founder and Chief Executive Officer Patrick Dovigi said Tuesday. “We will revisit at a later date.”

GFL joins a chorus of companies that have struggled to raise money through IPOs. WeWork and Endeavor Group Holdings Inc. pulled their sales in September while two companies in Hong Kong scrapped sales over the last two weeks. Saudi Aramco’s massive sale has been delayed, and may raise less than originally expected.

“Frankly a lot of it has to do with market tone,” said Michele Robitaille, senior portfolio manager at Guardian Capital, told BNN Bloomberg. “Right now, I would say the market has been a little bit more defensive and the appetite for deals with a lot of debt right now is pretty low.”

New York Listing

GFL’s sale at $18 a share would have raised about $1.6 billion based on the 87.6 million shares being sold, including a portion owned by a current shareholder. That would have given GFL a market value of about $5.7 billion provided the number of shares being issued and outstanding remained the same.

The listing in New York and Toronto would have been the largest for a Canadian company since Manulife Financial Corp.’s 1999 IPO that raised $1.7 billion, according to data compiled by Bloomberg. At the top end of the original range, it would have been Canada’s largest IPO.

“I went to the roadshow and it was packed,” Greg Taylor, chief investment officer at Purpose Investments, said. “Everyone was there because we haven’t has a good IPO for a while. There’s no question that the valuation was a bit on the high side.”

Taylor added the feedback he was getting was that Canadian investors were balking at the price “but the Americans could get their head around the strategy.”

GFL, with a fleet of bright green trucks, collects and disposes of solid, liquid and hazardous waste, including organics and recyclables. It has more than 10,000 employees and operations in Canada and 23 U.S. states. It also offers infrastructure services such as soil remediation.

Dovigi founded GFL in 2007 and has made over 100 acquisitions since, the largest being the $2.8 billion purchase of Waste Management Industries USA Inc. in 2018. The company has yet to turn a profit and has racked up debt to fuel those purchases -- C$6.5 billion, according to data compiled by Bloomberg.

Bloomberg Intelligence analyst Scott Levine, said third-quarter results for waste-management companies “were fair, perhaps that plus the IPO brought investor attention to the group’s high valuations.”

A sale of GFL to another waste-management company would be possible, said Levine, adding Republic Services Inc. would be a big enough and it would give the Phoenix-based company an entry into Canada. But it depends on how keen the sponsors are to cash out, he said.

“The fact that they were willing to scrap the offering for a couple bucks below the range suggests they are price sensitive,” Levine said.

The IPO was being led by JPMorgan Chase & Co., Bank of Montreal, Goldman Sachs Group Inc., Royal Bank of Canada and Bank of Nova Scotia. The shares had been expected to begin trading Thursday.

(Updates with additional comments from analysts.)

--With assistance from David Scanlan and Divya Balji.

To contact the reporters on this story: Scott Deveau in New York at sdeveau2@bloomberg.net;Crystal Tse in New York at ctse44@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Jacqueline Thorpe

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