GFL urged to go private by institutional investor


A Miami Beach, Florida, investment fund manager has written an open letter to the board of directors and executives of Canada-based GFL Environmental Inc., urging them to conduct a strategic review and perhaps eventually take the waste hauling firm private.

The letter signed by Adam Wyden of ADW Capital Management, posted in its entirety on the Yahoo! Finance website, says other investors and the wider public market have not rewarded GFL sufficiently for its growing business.

“We believe GFL is an extremely valuable company that the public markets are unable to appreciate today and perhaps never will be able to,” writes Wyden. “GFL is simply too cheap a stock on an absolute basis given the quality and durability of its future growth especially in this uncertain economic/inflationary environment.”

Adds Wyden, “ADW Capital has been a shareholder of the company since shortly after its initial public offering (IPO) [in 2020], and in many ways, today GFL is an entirely different company, and yet its valuation and discount to peers is exactly the same or worse.”

Wyden says ADW and its affiliate companies own about 1.65 million shares of GFL stock, which a news item on Bloomberg calculates as representing about 0.46 percent of GFL’s total shares.

In Wyden’s view, the lack of support from investors is best left in the past by taking the firm private. “We think your experiment with the public markets should end and the board should immediately seek to maximize value for shareholders through either selling or merging the company or disposing of assets, bringing down leverage materially.”

Continues the investor, “The multiple differential relative to [GFL’s] competitors is even more perplexing given its faster growth profile and prospects for future margin expansion.”

While Wyden may be intrigued by the firm’s prospects, he does not express a willingness to wait for other investors to change their views. “The board and management have a fiduciary obligation to maximize value for all shareholders, and we encourage them to immediately engage a financial advisor to pursue a review of strategic alternatives.”

Wyden’s letter is not a blanket endorsement of GFL’s current management, despite positive comments about the company’s ability to grow through acquisition and managing for increased profits between 2020 and projections for 2024. In one paragraph, he writes, “GFL continues to operate in an ivory tower, thinking it can just tell the market what the company is worth and the market will believe them. Frankly, we believe the company should return to the private markets.

“Financially, the company has seemingly made great progress,” writes Wyden. “So, the question one might ask is, ‘Why has the discount persisted?’”

In an attempt to answer his own question, Wyden suggests, “Waste management companies are extremely high fixed-asset businesses that own property that is functionally not duplicable (i.e. landfills). We believe this economic paradigm allows companies like GFL to raise prices at rates materially in excess of inflation and keep them. Why would investors price in higher interest rates/re-financing risk at GFL and not price in the higher [earnings]/margin expansion that will almost certainly accompany persistent elevated inflation? It’s actually quite simple in our view. Investors appear to be ignoring the facts here and only seeing what they want to see.”

Continues the investor, “We believe traditional public market waste investors have a hard time investing in the company as they are both slaves to beating their public market indices (GFL is not a member of the Toronto Stock Exchange 60 or any of the U.S. Indices due to its foreign domicile) and leery of investing in GFL knowing its largest investors are private equity investors who may have an alternative agenda or investment objectives.”

Should GFL wish to consider such a review, Wyden closes his letter by offering more of his own advice. “ADW Capital has a longstanding history of working constructively with boards of directors and management teams to unlock value in ‘orphan’ companies in the public market, and would appreciate the opportunity to present to the board and management.”


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