08:55 AM EST, 01/07/2025 (MT Newswires) -- GFL Environmental ( GFL ) agreed to sell a majority stake in its environmental services business to funds managed by affiliates of Apollo Global Management ( APO ) and BC Partners in a deal worth 8 billion Canadian dollars ($5.59 billion).

The Canadian waste management company expects to generate cash proceeds of about CA$6.2 billion, net of retained equity and taxes, from the sale. The company aims to use up to CA$3.75 billion of the proceeds to repay debt and make up to CA$2.25 billion available for share repurchases.

"The transaction will allow us to materially de-lever our balance sheet which will accelerate our path to an investment grade credit rating," GFL Chief Executive Patrick Dovigi said in a Tuesday statement. "A deleveraged balance sheet will provide ultimate financial flexibility to deploy incremental capital into organic growth initiatives and solid waste (merger and acquisition) and allow for a greater return of capital to shareholders through opportunistic share repurchases and dividend increases."

The transaction, which doesn't require any financing conditions, is expected to be completed in the first quarter of this year. GFL's shares listed on the New York stock exchange rose 2.8% in premarket activity.

GFL will retain a 44%, or CA$1.7 billion, equity interest in the business, while the Apollo and BC Partners funds will each hold a 28% stake, according to the statement. The waste management company will have the option to repurchase the business within five years of the deal's completion, Dovigi said.

GFL expects the deal to reduce its annualized cash interest expense by about $200 million amid expected debt repayments, "significantly" improving its free cash flow conversion, according to Dovigi.

"We believe this transaction will provide the environmental services business with greater flexibility to pursue organic and inorganic growth opportunities as an independent business," Apollo Partner Craig Horton said. "We look forward to working with the talented management team as well as GFL and BC Partners to accelerate growth and drive value creation."

GFL plans to provide more details on the financial impact of the transaction in full-year 2024 results and at its investor day in February.

"We are excited about the growth potential of this business, which is best placed to capitalize on the significant consolidation opportunity in the environmental services industry, including further expansion in the US," according to BC Partners Partner Paolo Notarnicola.