Dive Brief:

• Casella Waste Systems announced Monday that it has signed an equity purchase agreement worth $525 million to acquire assets from GFL Environmental in Pennsylvania, Delaware and Maryland. The deal is expected to close by Q3, pending regulatory approvals.
• The proposed transaction includes nine hauling operations, one transfer station and one MRF with annualized revenues of approximately $185 million. An estimated 570 employees work at those operations and are expected to join Casella.
• “After successfully extending our footprint into the adjacent Connecticut market with an acquisition in mid-2021, this acquisition will enable us to expand into the Mid-Atlantic region with these well-run solid waste operations that provide a platform for future growth,” said CEO John Casella in a statement. “We look forward to welcoming the hardworking GFL employees to our team.”

Dive Insight:

This transaction would be the largest acquisition by Vermont-based Casella in years, offering a chance to expand outside its Northeast footprint and internalize volumes at a Pennsylvania landfill project that was already in progress.

The company completed 14 deals worth $51 million in annualized revenues last year. Casella’s most recent notable expansion outside its footprint was the 2021 purchase of Willimantic Waste Systems in Connecticut. The company also currently has operations in Maine, Massachusetts, New Hampshire and New York.

According to Casella, approximately 80% of the acquired revenue would come from open market commercial collection and subscription residential service. This fits closely with the company’s existing collection business model. Executives have previously said this approach allowed them greater pricing flexibility during the recent inflationary period. Residential collection comprises the largest share of revenue in the GFL package (58%), followed by commercial collection (30%) and smaller shares from other categories.

Casella said it expects to generate approximately $8 million of incremental annual synergies by the third year of operating the acquired GFL assets “through internalizing certain volumes into its disposal network and capturing fleet automation efficiencies.”

Aside from the McKean Landfill in Pennsylvania, Casella does not currently have a presence in any of the three states where assets are included in the new acquisition. Casella is in the process of an investment in that rail-served site, which is permitted to take up to 6,000 tons per day, with a goal of it opening in 2024. In its announcement, Casella also noted that this platform “will offer more opportunities to deploy capital for organic and disciplined acquisition growth.”

GFL previously acquired many of the affected assets in late 2020, when it purchased a $863.5 million divestiture package from the WM-Advanced Disposal Services transaction. At the time, Casella had expressed interest in possible Pennsylvania assets, but WM’s preference had been to go with one buyer. GFL previously divested select Pennsylvania assets from that package, including multiple landfills, to Noble Environmental in 2021.

GFL previously announced its intention to sell an estimated $1.5 billion (Canadian) worth of assets that were not considered directly complementary to its operations. Speaking in the company’s February earnings call, CEO Patrick Dovigi said the decision was driven by GFL ranking third or lower in terms of market share in the respective areas. “We just didn't see a path to deploying incremental dollars into those markets to be able to grow them significantly from the position we already have,” he said at the time.

Details about divesting other assets — including in Colorado, which Dovigi also referenced on the call — are still pending. Definitive agreements for all assets have been targeted for Q2, with deals closing in Q3.