CIBC Capital Markets believes GFL Environmental's (GFL.TO, GFL) $6.4-billion offer to acquire Secure Energy Services (SES.TO) provides shareholders with an attractive premium, while also retaining potential upside of the combined company.
In a note, analyst Jamie Kubik, who has raised his price target on Secure to $24.75 to reflect the offer price, and moved his rating to tender from neutral, says the combined company provides Secure shareholders access to additional segments of the waste management value chain, resulting in less revenue concentration and enhanced growth potential.
The increase in GFL's float capitalization could also enhance potential for broader future equity-index inclusions, he adds.
Canadian Competition Bureau review of this deal will be watched closely given recent history, Kubik says. The Bureau previously challenged GFL's acquisition of Terrapure and Secure's acquisition of Tervita, with the latter review resulting in the forced disposition of select Tervita assets.
"Given select Tervita assets were already carved out of the Secure platform, we believe it is unlikely further dispositions of such a magnitude would be required, but nonetheless we will be interested to see how the Canadian Competition Bureau views this transaction."
Price: $21.80, Change: $-0.64, Percent Change: -2.85%