03:37 PM EDT, 06/03/2024 (MT Newswires) -- Truist Securities noted Environmental Services investors had a busy morning with GFL (Truist has a Buy rating) now reportedly drawing interest from private equity sponsors after Waste Management's (WM, Buy) move to acquire Stericycle (SRCL, Hold) announced earlier this morning. Truist thinks reported interest in a potential sale of GFL's Environmental Services segment (near 20% of EBITDA) or the entire company underlines its thesis that management should have optionality to close the now near 20% multiple discount to Solid Waste peers. GFL remains its favorite name in the Solid Waste group.

Among highlights, Truist noted:

- GFL was trading up 10% this afternoon (vs. S&P down) following reports that the company may be receiving interest from a consortium of private equity sponsors. According to a report this morning from CTFN, private equity bidders may be interested in buying all or part of GFL.

- GFL believes a most likely scenario would be a potential sale of all or part of the Environmental Services segment. Stericycle being acquired at a near 15 times 2024 estimated EBITDA multiple and other scale transactions in the hazardous waste sector suggest an ES divestiture at a premium to GFL's current 12.7 times trading multiple on Truist's 2024 estimates could be achievable. GFL said selling the ES business would likely reduce leverage (4.3 times last quarter) "significantly", which it added "has been a consistent sore spot for investors and a primary driver of the valuation discount to Solid Waste peers."

-- Truist thinks reported private equity interest in GFL's assets supports its thesis that management should have multiple avenues to create shareholder value and close the multiple discount. Truist believes further multiple compression would be required to drive the stock materially lower, "which feels unlikely here with reported private equity interest and a relatively wide near 20% multiple discount to peers still reflected in current valuation."

- Truist's sense is that GFL management would likely have a sizeable Solid Waste acquisition in the works if opting to sell all or part of the Environmental Services business. Management's reputation as aggressive dealmakers suggests to Truist that GFL would not operate with leverage well below peer averages for long.

- On Valuation, Truist's US$46 PT assumes a 14.3x EV/EBITDA multiple on its 2025 estimates. Solid Waste peers currently trade at near 15x 2025 EBITDA on average.

Price: 47.00, Change: +4.09, Percent Change: +9.53