SECURE Waste Infrastructure Corp. ($GFL)

Hello, everyone, and thank you for joining us today for the GFL Investor Update Call. My name is Sami and I'll be coordinator for today's call. [Operator Instructions]. I'll now hand over to your host, Patrick Dovigi, CEO and Founder of GFL to begin. Please go ahead, Patrick.

Thank you, and good morning. I would like to welcome everyone to today's call, and thank you for joining us. Earlier today, GFL and Secure Waste Infrastructure Corp. jointly announced that we have entered into a definitive agreement for GFL to acquire 100% of Secure's common shares for an enterprise value of approximately $6.4 billion. We believe this is a highly compelling transaction for both GFL and Sakura shareholders. I am joined this morning by Luke Pelosi, our CFO; and Alan Grant, President and CEO of Secure. Luke will take us through our forward-looking disclaimer before we get into the details.

Thank you, Patrick. Good morning, everyone, and thank you for joining. We have filed a press release and investor deck, which include additional and important information on this transaction. These materials are available on our website. During this call, we'll be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators. Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise. This call will include a discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators. I will now turn the call back over to Patrick.

Thank you, Luke. The acquisition of Secure provides a unique opportunity to acquire a leading waste management provider in Western Canada. Secure's highly complementary footprint of difficult to replicate post-collection assets significantly densifies our footprint enhances our scale and expands our ability to offer a full suite of services to our customers in Western Canada, a market in which we have long operating history and favorable long-term outlook. Over the past decade, we have observed the maturation of secure into a high-quality waste asset with predictable cash flows tied to durable waste production with 80% of volumes tied to recurring waste streams. In 2023, we bid to acquire a package of secures assets that were forced to divest as part of an acquisition, but were unsuccessful. Since that time, we have continued to observe the improving quality of Secure's business in the markets which it operates in. Secure's portfolio of landfills, transfer stations, recycling facilities and critical waste infrastructure are best-in-class and position the business for continued success. Structural tailwinds provide ongoing support for secure services, and we expect the evolving macro environment to drive incremental demand over the coming years and decades. Alan and the entire secure management team are extremely impressive operators with a track record of equity value creation, and we look forward to utilizing our new combined footprint to further enhance shareholder value. Luke will walk through the financial impacts in detail, but at a high level, the acquisition is highly accretive across nearly every financial metric. Secure's mid-shorts adjusted EBITDA margins, combined with relatively lower maintenance capital requirement yield a 50-plus percent free cash flow conversion. The pro forma impact of this acquisition significantly accelerates the achievement of the multiyear financial targets we shared at our 2025 Investor Day including low to mid-30s adjusted EBITDA margins and mid 48% free cash flow conversion exiting 2028. Additionally, being able to do this transaction on a leverage-neutral basis is a unique opportunity and 1 that we think is going to create meaningful value for both GFL and secure shareholders. On this point, I will hand the call over to Allen, who will provide additional context from SECURE's perspective.

Thank you, Patrick. Good morning, everyone. I'm very pleased to be here today and excited to announce this transaction with a which represents an important milestone for Secure and our shareholders. Secure today is a large-scale wage infrastructure platform with the largest processing capacity in Western Canada supported by a network of more than 80 facilities. Secure's network of critical weight infrastructure across Western Canada and North Dakota spanned waste processing, recovery, recycling and disposal and integrate naturally with GFL's broad North American platform. The combination expands GFL's footprint in key industrial markets and strengthens the ability to capture more waste streams and vertically integrate across the value chain. Over the past several years, SECURE has executed a clear strategic repositioning within the waste sector, building a high-quality infrastructure backed business characterized by stable cash flows, durable growth and industry-leading financial metrics. This transaction accelerates that recognition by capturing the intrinsic value of the business today with a share price premium of approximately 23% to the 60-day VWAP while also providing our shareholders with meaningful participation in the upside of the combined company through a significant equity component. We also believe the continued ownership is important. SECURE brings a high margin, free cash flow generative business that enhances GFL's financial profile, supporting improved margins double-digit adjusted free cash flow per share accretion and incremental capital deployment opportunities. Overall, we believe this is great value for SECURE shareholders, and the result is a stronger pro forma company with a clear path to long-term value creation, positioning our shareholders to benefit from the growth of a larger, more scaled platform. For our customers, this combination is also compelling, it enhances our ability to deliver reliable, integrated environmental solutions across a broader footprint with greater scale and the capabilities to meet increasingly complex waste handling needs. Now none of this happens without our people. Our team has built this company with a focus on safety, operational excellence and doing the right thing. These values are deeply embedded in how we operate and we are strongly aligned with GFL. With GFL's scale and platform, we see a clear opportunity to accelerate growth, expand our capabilities and capture opportunities that would take longer to realize on a stand-alone basis. This transaction brings the leading strategically positioned waste infrastructure platform into GFL, unlocking the next phase of growth from that foundation. We're proud of what we built, and we're very excited to be part of the GFL and continue the growth of the combined company. I'll now pass it -- I'll now pass the call over to Luke?

Thank you Allen. Page 4 of the investor deck highlights the significant accretion to our financial metrics expected from this transaction. Note the first column on Page 4 is the original 2026 guidance we provided and has not been updated to reflect the impact of the M&A that has been completed year-to-date. As we previously announced, we expect to significantly update our GAAP 2026 guidance when we report our first quarter results at the end of this month and the actual 2026 adjusted EBITDA pro forma for Secure would therefore be something greater than the $2.15 billion shown on Page 4. With that, assuming our original 2026 guidance, on a pro forma basis, the SECURE acquisition would increase adjusted EBITDA 27% and adjusted EBITDA margin by 100 basis points to 31.6%. Furthermore, assuming the midpoint of outcomes, adjusted free cash flow would increase approximately $300 million to over $1.135 billion, representing adjusted free cash flow conversion of nearly 42%, and adjusted free cash flow per share would increase approximately 15%. As Patrick stated, this significant growth is being achieved on a leverage-neutral basis, once again demonstrating our commitment to keeping net leverage within our stated range of low to mid-3s. The transaction is being contemplated at an enterprise value of approximately 11x 2026 adjusted EBITDA or at a share price of approximately 18x free cash flow an acquisition price that is expected to generate a compelling return on a stand-alone basis. The ROIC opportunity is significantly more compelling when considering the opportunity for incremental capital deployment resulting from the transaction. Our financial algorithm is that adjusted EBITDA growth and free cash flow generation, reduce leverage and provide balance sheet capacity for returns-focused capital deployment. When you model out the go-forward balance sheet, adjusted EBITDA growth and free cash flow generation pro forma for Secure using conservative assumptions, you have nearly $1 billion of incremental capital to deploy over the next 2 years or nearly $2.5 billion of incremental capital over the next 4 years that could be used for M&A, organic growth projects, share buybacks and dividends and should be an opportunity for significant incremental value creation. Additionally, the pro forma enhanced scale and free cash flow generation are expected to be positive updates for our credit profile -- we continue to see opportunities for credit rating upgrades in our future, which should be incrementally positive to our financial profile and increase our appeal to a broader base of equity investors. Similarly, the pro forma enhanced scale will improve index inclusion opportunities a significant increase to our float weighted market cap likely to result from this transaction will further bolster the relative sizing of GFL that is considered when evaluating inclusion in indices like the TSX 60. I will now turn the call back over to Patrick.

Thank you, Luke. I would just summarize by framing the acquisition as the following: A highly complementary business that significantly densifies our existing footprint in an attractive market in Western Canada. Immediately accretive across all key financial metrics provides enhanced scale and free cash and that improves opportunities for returns-focused capital deployment, credit rating upgrades and indexecution. I will now turn the call over to the operator to open up the line for Q&A.

[Operator Instructions]. Our first question comes from Sabahat Khan from RBC. Please go ahead.

Great. Just maybe just starting at a higher level, if you can maybe just share some thoughts around kind of the -- you talked a little bit about the assets, but maybe the strategic rationale, why now was the right time? And then with the increased exposure into Western Canada, maybe if you can just share some thoughts on what the E&P exposure looks like or where you want it to be longer-term pro forma?

Yes, I mean, I think from our perspective, this is an asset that we've been looking at since the original divestiture packages of 2023. And when we think about the strategic rationale, a multitude of front. We've been operating in Western Canada since our first acquisition in Western Canada in 2010. We're in a lot of the markets where SECURE is operating at today, albeit maybe not doing exactly the same services that they're doing today. But I think when we look at it and how Allen and the team have transform the business really over the last 5 years to now be in a market with its largest competitor sort of being waste connections, which is obviously a large competitor of ours in the sales side. We think the setup for that is very well. I think to Luke's point in terms of where we're looking at in terms of sort of overall revenue, I mean, if you take a look at it in the sort of most punitive way, you could say you basically have, call it, $1 billion of revenue that is tied directly to those markets where you see would be more sort of E&P focused. And if you take the bread forms for '27 and sort of how we're thinking about the business sort of longer term, I think on a pro forma basis, pretty hard to see the business on an overall basis would be $9 million and less than sort of $9.5 billion of revenue going into $27 million. So that represents sort of like E&P exposure of, call it, 10% to 12% on the overall business. Our intention is not to expand our E&P business and by other industrial businesses across the portfolio. This is literally just exposure -- to increase our exposure to Western Canada around a very unique opportunity in a high margin, high free cash flow business that highly complements our existing portfolio in Western Canada. And you sort of put all those breadcrumbs together, I think it's going to be highly compelling as we roll into '27. We're using '26 numbers here. But ultimately, we use '27 numbers and where the business is going. EBITDA is definitely going to start with free, revenue is certainly going to be 9.5% plus or minus a couple of hundred million. And you're going to be converting to free cash flow at sort of low 40s as we discussed. So free is sort of $1.3 billion plus next year. And I think that to us is sort of highly compelling as well as getting a business from our perspective at a very reasonable purchase price multiple with very low integration risk, right? This is an experienced management team and again, markets where we already operate, with management teams that are going to exist in those markets that can work in a complementary fashion with the existing management team. So we think integration risk, obviously very low. So that's what excites about the opportunity. I think one point to raise as well. We debated a lot about where this fit within the portfolio. Did it fit more with ES, did it fit more with solid waste and I think when you actually look at the assets, again, having 12 major landfills with a permanent landfill PC, again, significant opportunities to retool some of those sites to be able to receive some of our incremental waste streams within the book. I think 12 recycling facilities, 5 transfer stations and the injection wells are all things that we do on the solid waste side, and we do them very well. I think the treatment facilities and the storage terminals are something that we would more do on the liquid rate side. but that only represents 25% of the business today. So from our perspective, this was a better fit for solid waste than it was for Environmental Services. And again, for all those reasons, we think is very compelling. This is not a change in strategy or direction. The lion's share of our capital is going to continue to get spent on solid waste tuck-in M&A within the existing geographies where we're operating. This just happens to be a larger opportunity. But ultimately, it's the exact same thing we do in all the markets with a very highly compelling sort of financial profile.

Great. And then I've got a couple more questions, and I'll just roll into one. The first part, maybe a bit more color on, you call that $25 million of synergies. What specifically is in there? And any thoughts on ability to use landfills maybe going to collection? And then second part, if you can just comment on some of the additional businesses that SECURE has such as midstream, the metal, the specialty chemical, just -- is that something you expect to keep as part of the business? Just thoughts on those 2, and then I'll pass away.

Yes. Thanks, A great question, Luke speaking. Look, on the synergy part, $25 million, we characterize this as a highly conservative estimate, really focusing on low-hanging fruit duplicative G&A type costs. As Patrick said, we're very excited that the entirety of the secure management team wants to stay and so we keep running and growing this business. But 2 public companies coming together you start thinking about public company costs, audit fees and the other sort of low-hanging fruit. I think that's the majority of what's been identified. I think the opportunity could be upwards of sort of 2 to 3x that when all said and done. If you start thinking about commercial overlap opportunities and revenue generation. But today, that $25 million is really just focused on what characterizes SG&A type cost savings, really more on sort of professional services, insurance and other public company-related type costs. In terms of the business mix, look, as you said, Patrick alluded to, I mean, Allen and the team have done a phenomenal job of sort of maturing or transforming this business into waste infrastructure asset with the recurring cash flows that are durable across various cycles. And that's the type of asset we sort of like, whether it's in the metals recycling, specialty chemicals, those segments all sort of form part of the whole, and we're very happy with the mix that they have today. Will that augment around the edges as Allen and the team continue to sort of mold and craft the portfolio as it goes forward, I'm sure it will. But there's no sort of 1 distinct subsegment in there today that we think doesn't fit into the portfolio, and we'll continue to evaluate as we do with all of our business offerings as and when opportunities arise.

Our next question comes from Stephanie Moore from Jefferies. Stephanie.

Great. I wanted to ask just one question, but maybe kind of 2 parts of the same topic. So first, maybe talk a little bit about how the M&A pipeline looks just for the remainder of this year. And then, Patrick, you alluded to this a little bit. But as you think about pro forma there, how would you characterize the M&A strategy going forward?

Yes. So for the balance of the year, we expect that we'll deploy an incremental $400 million to $500 million into tuck-in M&A across the portfolio. 100% of those dollars will be spent on solid waste, M&A that tucks into existing geographies really on the backs of underutilized post-collection assets. So no change from that perspective. I think when you roll into '27 and you're going to have a $3-plus billion EBITDA business, I think you can do the math and put the organic on after our updates. But you're going to be in low 3s next year of sort of EBITDA, converting free cash flow at somewhere between 41% and 42%. That's going to yield $1.3 billion plus of free cash flow. As Luke said in his remarks, that affords us a lot of flexibility in what we do with that capital. The lion's share of that capital is going to continue to get deployed in those same solid waste tuck-in M&A transactions across the solid waste footprint in both Canada and the U.S. Obviously, we'll have incremental dollars to use for share buybacks as well as delevering. But I think when you run that with this pro forma -- with this transaction on a pro forma basis, I think you can easily spend the $1.5 billion to $2 billion a year on M&A, and you're still going to delever sort of 15 to 20 basis points a year if you want to do. Obviously, if you do less -- you're going to just delever faster and have incremental dollars for share buybacks and/or dividends. So we're going to have ultimate flexibility. We'll assess as a company and as a Board, but with the right capital deployment strategy will be. But know that we have ultimate flexibility, which is a very good place to be.

Our next question comes from Patrick T. Brown from Raymond James..

Yes. So congrats on the transaction, but I got a question for Allen. So we've been watching secure from afar for some time. But can you kind of give us a little bit of color on the visibility to organic growth and secure over the next few years? I think you guys have a pretty robust organic growth pipeline kind of building there. And then real quick, Luke, would you expect this to be a separately reported segment once it's closed.

Good morning, Tyler. Yes. I think when you look at our organic spend over the past few years, we've been averaging $100 million in new projects A lot of those projects have been funded with long-term contracts with very large customers. As we think about 2026, we've already announced $75 million of growth capital, and it's a little bit unique in terms of growth capital. We do have price and volume growth, but we also have these new facilities that we that we bolt on or expand our existing locations. And so this year, we're spending $75 million. I expect that number is going to be higher as we get through the year. But I've explained this before. Our hopper is anywhere from $300 million to $400 million we're going to continue to execute $100 million of opportunities per year. And obviously, that will be in conjunction with having discussions with Patrick and Luke on what's our best IRRs and where do we think our capital is fast place. But that's not going to slow down. Our offer is going to continue to grow. I think that the backdrop here in Western Canada is very, very strong. And I think we're going to have lots of opportunities and new opportunities to keep expanding that. So no, it's quite strong.

And then Tyler -- yes, in terms of your segment question, look, I mean, we're constantly evaluating our financial reporting, making sure we have sort of sufficient disclosure out there as we get into 2 which is when this is going to be sort of most relevant, we'll sort of revisit. Certainly, I don't think there's a scenario in which the secure business as it exists today, would reported stand-alone just because of the sort of overlap that it would have with our Western Canada business. So they do some resegmentation versus our current segment reporting. But it will be more 2027. As Patrick said, we'll look at the M&A that's happened, the relative size of the pieces at that time, and we'll look at that. But even if it's not a stand-alone segment, will make sure they provide you some nice quarterly bridges, so you can understand all the moving pieces.

Okay. Look, I appreciate that. All right, Patrick, so you kind of touched on it a little bit -- and we can talk a little bit about securing, call it, GFL proper and the overlap that you have. But how much does Secure compete with GFL Environmental Services -- and does this transaction change the calculus longer term on both your willingness and your ability to exercise that ES option and, call it, 29% or 30%.

Yes. There's very little competitive dynamic between Secure and the GFL business, which was, again, one of the reasons why we looked at where we were going to put it as a board. Well aware that on the face of it that maybe someone could Pokal obviously, on every financial metric, there's nothing anybody can argue with that this transaction makes sense, right? But I think when you look -- when you actually dig deep into it, the lion's share of what SECURE does is what GFL does across the country in -- both in Canada and the U.S. and the lion's share of those assets fit directly in, again, long-term contracts against what we would view as post-collection assets that yield sort of great financial results. Does it change anything and how I think about -- again, it complements the E, but it doesn't compete with it. So again, I think from our perspective, it doesn't really change anything on what we would do with the asset. But again, you look at what the multiples of those are trading at in the private sector. I mean, we sold our ES business for almost 15.5 to 16x, right? You look at what Veolia paid for the Clean Earth business, I think that thing traded for closer to 18 to 19x. We think buying this sort of around 11x pre-synergies on versus rolling that out to 27%, which is probably closer to 10% and still meaningful opportunity for increased synergies with some of our -- with conversion of some of the landfills to receive some other incremental waystreams as Allen said, to internalize more volumes into those landfills is very compelling for us. And I think this acquisition is going to provide exceptional results both financially and operationally with an exceptional management team that they have and with very low integration risk. And most importantly, their shareholders, their board, their largest shareholder, believe in the combined entity and are taking 80% stock to keep this leverage neutral to be able to give us the firepower to go and continue growing the business and the combined entity and believe that there's material upside in the combination, and so do we. And that's what makes it compelling for us. And I think when you look at that, this is a very unique opportunity. with an extremely great margin profile, free cash flow profile, and these opportunities don't come along every day. Sure. What I'd like to do on when GFL was trading at $5 or $6 higher, Sure. But -- at the end of the day, it doesn't materially change any of the economics as you move forward. And I think it just puts us uniquely square in the position of where we want to be -- and I think for all the reasons Luke and Allen have mentioned, we're just in a great stock, and it's going to be a great deal. And the best dealer with both sides win and both shareholders of GFL are going to win and SECURE, shareholders are going to win over time as well. So I think it's great.

Okay. And one really quick last one, Luke, on the U.S. GAAP transition. Does this change or slow that potential?

Yes. Thanks, Tyler. No, we continue to evaluate and look at sort of options. So the broader sort of financial reporting, we are going to continue to prepare to be a U.S. GAAP filer, and there likely will come a time when that is the right decision for this sort of company. when that exactly is, is still sort of TBD, but we'll be sort of prepared to sort of do so and the index inclusion opportunity that was really a driving for us as to why maybe you'd want to accelerate that. It is quite possible that the pro forma impact of secure together GFL materially advances our index inclusion opportunity here in Canada. Right? And that would be a very nice sort of stepping stone along the way for broader index inclusion, perhaps reducing the sort of near-term impetus or need or desire to accelerate the.

Yes. And I think first step is the Russell, obviously, which we should get some more clarity on certainly by April 30, which could be very favorable and positive outcome as sort of our expectation. Obviously, no promise, no guarantees, but April 30 is when we should get some pretty good color in terms of what that looks like.

Our next question comes from Kevin Chiang from CIBC Wood Gundy.

Yes. Maybe you've noted a few times these are complementary services with secure, but I guess we've seen the competition bureau step in when you look to acquire when you acquired Terrapure and clearly, they stepped in when Secure acquired the Tervita assets. They seem to be I guess, reticent around some of the consolidation more broadly in the Western Canadian waste industries. I guess given your previous experience with them, just why you think maybe the Competition Bureau approves this deal in a short time with the second half close or maybe your experience with them gives you a little bit more color on the things that might be pain points that you would have addressed already in this transaction?.

Yes. I think at the end of the day, we're realized. A big part of the assessment we did was obviously doing just that. we are very well prepared and have spent a significant amount of time doing the work that we needed to do to ensure that we didn't believe that there was any material regulatory issues. And we'll make our submission over the course of the next sort of 7 to 15 days, and we'll start the process. But we feel very confident both on the secure side and on the GFL side, that this should be approved for all the reasons that sort of we articulated on the call, highly complementary to or less competitive. And given the work that the bureau previously did with the recent secure Tervita divestitures to WCM is a good framework because I think a lot of that work has been done already, which gives us a lot of confidence in terms of what the bureaus expectations are going to be around certain markets, et cetera, given the work that was done as recently in the last sort of 1.5 years to 2 years.

That's helpful. And maybe just in terms of -- Luke, you provided good color on the kind of the cost synergy opportunities. But in terms of cross-selling, -- maybe if you can speak to where you see some of the opportunities, if any? And then maybe your experience with your legacy ES business and the cross-selling strategy there, are you -- does this accelerate that? Or have you seen good success there. And clearly, you think you can lever that into these secure assets?

Yes, Kevin, it's a great question. One of the things that gets us excited is you look at the secure facility. Now we get mostly post-collection facilities, right? Collection isn't a meaningful part of the sort of secure service offering today. And it's obviously an area in Western Canada, where we are very large and sort of well entrenched, right? So all those customers have collection needs as well. And so that seems like some low-hanging fruit opportunity on the commercial sort of synergy side. And then additionally, you've heard us say something, but like most customers have regular way, solid waste needs. Right? And so there's an opportunity to look at the sort of customer book and ensure that if there's customers there that SECURE servicing and some capacity if they are regular way commercial or normal course waste, that represents another sort of opportunity for -- to expand the GFL service offering in that. So we're excited about the commercial synergy opportunity. We think that could take the cost synergy of $25 million opportunity up to something, as I said, 2 to 3x higher than that in the -- over the course of this sort of coming together. But that's something that we will update and articulate as we get closer to integration and have that sort of more well laid out.

Our next question comes from Konark Gupta from Scotia Capital.

Allen, great to hear your voice on GFL calls. Congrats on the deal guys. Maybe a first 1 for me. Patrick, do you know the 80 assets you're acquiring here or 800 sites from secure -- how do they compare to the 29 sites secured retail had to divest in 2024 to waste connections?

Probably a better question for Allen, but I think from what we sit very similar, but I'll turn it over to Allen.

Yes. Yes, you're exactly right. I always characterize it as they were a representative sample of our overall network of 80 facilities. And so we would be directly in line with these locations where they're spread across Western Canada. In some markets, we do compete with WCN, but for the most part, yes, they're representing a sample of the assets.

Okay. And then if you look at the commodity exposure, and Allen, think we have chatted about it in the past. I mean, you guys are 80% production tight. So probably not a lot, but maybe more a question of strategic rationale to Patrick for you. Are you taking a lot more commodity risk at this point, do you think with the 10%-plus E&P exposure you will have? And where the commodity prices are today, I mean, they may not be sustainable long term? Like any thoughts there?

Yes. Well, again, I think that was the beauty of the business the way that Allen and his management team have retooled the business over the last 5 years, there's very low commodity risk. I think we took a lot of comfort in sort of $55 to $60 WTI last year and sort of how the business performed. I think that's the beauty of the business, how they built it now, but visiting highs and terrifying lows, the business generally performs very similar. Yes, there might be some modest upside from the numbers we looked at with the increased sort of WTI. But all of our work, we signed -- we actually entered into the transaction and our work was done pre the war in Iran. So I think when you look at -- from a debt perspective, again, we took a lot of comfort in that there wasn't a lot of commodity risk. And from our perspective, there's not. And a lot of this is sort of on the maintenance side and sort of not dependent on incremental waste streams that come from new drilling, et cetera. So I think we feel very comfortable about it. again, it's immaterial in the overall book of business. Like we said last year, like I said in my previous comments of sort of $5-plus billion of revenue for '27.There's modest commodity risk. And I think from our perspective, that is a very good place to be with just given how Allen and the management team have retooled the business.

And Konark, just to add that very modest commodity risk that Patrick said, the fact that it's countercyclical like to our existing GFL business. What I mean by that our diesel price, we buy 50 million gallons of diesel that going up and down. I mean this commodity risk and secure is sort of the inverse of that. We used to have a little bit of that when we have the ES business that served as a sort of natural economic hedge again sort of diesel price volatility that, as you know, solid-waste business could have on a short-term basis. So notwithstanding Patrick's emphasis we think the commodity risk is de minimis. The fact that it goes the opposite direction of the risk that I have in the GFL diesel consumption is a nice natural hedge.

Makes sense.

Our next question comes from Trevor Romeo from William Blair.

Patrick, I think you talked about very low integration risk here. I was wondering maybe if you could talk a little bit more specifically about the integration plans that you have? I guess are there any sort of bigger migration efforts required in terms of the brand? Do you take care brand ad market? Do you integrate under GFL? Just any more details you can provide on kind of the integration plan, how much, how fast anything like that is helpful.

Yes. So break it out, again, client-facing and then sort of back office, the way we sort of think about the secure brand will move to the GFL brand over time, not going to sort of happen overnight, but we'll definitely happen over time. And then I think, obviously, on the HR front, the accounting front, sort of on pricing and procurement. Again, those are -- from an integration perspective, that sort of rings and repeat. -- done that multiple times with over 300-plus acquisitions. So we have a very well-defined playbook on that front. I think operating systems, again, where we are today with sort of AI, the integration of those into sort of our back-office systems is going to be very quick. Obviously, the moving to our accounting system is going to be very quick. The moving to our HR platform is going to be very quick with sort of very low risk. And the beauty is with the assets that are sort of highly complementary, there is not -- we haven't modeled significant sort of synergies coming from facility consolidations, et cetera, and headcount reductions. So that's not what this is about. So I think from where we sit, going to be very modest integration risk, if any, at all. So it should be very smooth, should be very quick and shouldn't really have any issues.

And Trevor, one of the things you've heard us say before, people often think larger deals pose us with a greater integration risk. Our experience has been the quality and capabilities of the team that come along with a larger deal actually materially sort of aids in sort of integration sort of planning. So when we think about -- as Patrick was saying, whether sort of Chad, who runs the sort of -- the CFO running the finance function, Michael in HR. These are very organized, well called by professionals with processes, et cetera. And we've historically found that really sort of ease the integration process versus what you might see at some of the smaller, what we call mom and pops that are less accustomed to the processes, systems, et cetera, associated with being part of a public company.

Great. And then maybe for my follow-up, I guess you've kind of announced 2 larger deals recently with Frontier and now SECURE. You talked about the $400 million, $500 million of core tuck-in the rest of the year. I guess as you think about the next few years and kind of the pipeline for deals that are maybe larger than your typical 30 million under EV mom-and-pop type taking -- what else is out there? What are you kind of interested in doing? How do you think about that opportunity, I guess, open?

Yes, nothing sort of any size or scale anywhere near sort of the frontier size? I mean, again, like we said historically, those sort of come up every sort of couple of years. That was 1 obviously we've been working on for a while. But I think as we sort of look into 2017, where we sit today, obviously, things can change, but where we sort of sit today. There's a couple of opportunities that I would say are north of $50 million of EBITDA that, again, always on our radar, always in discussions with. But again, the lion's share of what we see today is again, $1 million to $10 million of EBITDA across a broad book, both in Canada and the U.S., no plans to go outside the geographies that we're operating in today. We're just going to keep doing exactly what we will be done sort of rinse and repeat for sort of a long period of time. But I think as we move into -- from an integration perspective, obviously, the team is set up to do it, but Frontier was well underway going into the end of last year and through the beginning of this year. So integration there is well in hand and expectations that will be done in the next sort of 45 to 60 days. And then now as we turn our sights to the larger 1 in secure, again, a very good team there that will make that process seamless -- so again, we're not expecting anything there. And as we said, we'll -- we'll spend another sort of $400 million to $500 million on traditional tuck-in M&A this year.

My next question comes from Shlomo Rosenbaum from Stifel.

I have kind of a strategic question -- looking at it from Allen side and Patrick side. Allen, maybe you can comment a little bit more on strategically why getting together with should accelerate the growth for your core business. You made a comment that you think you can grow faster afterwards? And then strategically, Patrick, do you think about the business being more economically sensitive post this kind of acquisition? Or maybe you could just give us a thought on that. And then I have 1 follow-up for Luke.

Sure, I'll start. Thanks for the question. Yes, when we look at the businesses and Luke has mentioned it, we want to look across our infrastructure platform that we said multiple times, it's very complementary. But when we look at our service offerings to our customers and they see a broader suite of offerings, specifically on the waste collection and on the infra side, we're going to be able to expand what we do together for that customer and offer that better service offering. And when we think about the [indiscernible] capital, I mean, when you put a larger company together, we're going to do a $37 billion together here and you look at the cost of capital, and we have access to more capital that we could deploy to some of these organic opportunities, which are fantastic. I mean, we're building these things at a 4 to 5x build multiples we look at opportunities that target after-tax IRR greater than 20%. And so we're going to look at the network together. We're going to look at the offer of opportunities. As I said, the backdrop here in Western Canada continues to get better, as we think about the longer term and instead of some of the areas we're located at continue to grow each year. We see production in Canada growing at 2% to 3%, which has been more waste volumes. And when you see more waste volumes, you see more opportunities to deploy capital. And so I think with the team and the total infrastructure, I think that's going to be very advantageous to work together on what our platform can do and how quickly it can grow, even on -- when I think about LNG and the coast, we've got a waste plant to get. There's more we can do there. We've got our new Redwater facility, which is the last one facility. We've got one of the -- there's only 2 Class 1 hazardous plan build in Alberta. We own one of them. And so there's obviously going to be material there that we could bring in, which we alluded to earlier. So yes, there's lots of opportunities here to accelerate.

Yes. And your point on sort of the economic sensitivity to the business, where we sort of sit today, again, if you look at secure I mean the economic -- I mean all of our businesses are economically sensitive to the macro. That being said, if you want to just look at the perspective of the secure business and sort of what is tied to more sort of commodity-based streams, you take that, and that's, call it, 20% of the revenue today, 20% of the revenue on $1.5 billion to $1.6 billion is sort of $300 million. If you think about $300 million of economically sensitive revenue tied to a business that's going to generate somewhere north of $9.5 billion. I mean it's miniscule in the grand scheme of things, right? So again, that's not something that worries us. And going back to Luke's point, it's sort of a natural hedge against the other parts of our portfolio. So we feel sort of very comfortable with that.

Okay. And then Luke, is it fair to assume that the way that you looked at this was just a matter of that $25 million of synergies based on what SECURE was talking about kind of coming out in the fourth quarter of the year because with some of the changes in crude prices, it looks like that the EBITDA target looks a little bit low.

Yes. Shlomo, I mean the one thing we've realized in these public equity markets and Allen knows as well is that you guys like underpromising and overdelivering. So we've just taken Secure's base guidance that they gave at the beginning of the year. I'm sure when Allen and his team so to speak on their quarterly update, they'll provide their outlook, but we're certainly feeling like there could be upside secures numbers. Similarly, you'll note that all the financial metrics in this deck are based on GFL's original guidance, which as we've very clearly said is going to get raised significantly as well. So we think there's upside to these numbers. The synergy concept of $25 million I spoke about earlier on the call. I think there's upside to that. And the fact that the financials are so compelling, even with this conservative view, as part of that, I think, gets us excited when we think about what we ultimately may be able to deliver above and beyond this baseline.

Yes. So just again, I want to reiterate the point. We're big believers in Western Canada. We think Western Canada is going to be the growth engine for Canada for the next number of years. And we want to have exposure to that market, more exposure than we currently have, which has been an amazing market for us over the last 16 years. We're not changing the strategy, where we're going to go into Texas and other places and by some business that has more exposure to sort of E&P. The strategy is the same. We just have more capital to deploy on the existing strategy that we had over the next number of years. in a market where we already operate that's sort of highly complementary. So again, great assets, great margin profile, great free cash flow profile, very low volatility in a market we love is the sort of rationale for the transaction.

Our next question comes from James Schumm from TD Cowen.

So yes, I just wanted to -- not knowing SECURE's business as well. I just wanted to drill down on the commercial overlap opportunities again. it's like what are the commercial overlap opportunities? I mean you're not using the same collection assets, right? So when you -- like Luke, you mentioned the synergies, it's more on the revenue synergy side, right? Like -- or maybe you could talk about are there opportunities with the landfills and you could talk about that internalizing some waste there.

Yes. Of course, that is one of the obvious synergies internalizing incremental waste into the tire portfolio of landfills. That's one. Two, it's moving some of the services that GFL does today onto the back of some of those services that SECURE does today, which we think is a meaningful opportunity as well. So Again, if you look at a map, if you look at the sort of the map on Page 6 of the deck, you'll see the green dots sort of around secure, which, again, those are largely sort of hauling facilities, right? So if we can penetrate the existing customer base to augment some of those services and then internalize those volumes into our -- into the secure facilities. We're going to have a very sort of good recipe for success. And we have the confidence and belief that we can do that. We've had that success when we previously had the ES business, and there's no reason to believe that we won't have this success doing that today.

Okay. And then just what's your long-term view of the secure business, given that it's heavily levered to oil and gas, do you have any terminal value concerns there? I mean 3 or 4 years ago, everybody was concerned that for energy investors that we weren't going to use -- we're not going to be using oil and gas in 10 or 15 years. That narrative has shifted dramatically. But just any concerns there on the long-term strategy.

I think the line service to that, I think it's been clearly demonstrated over the last number of years that sort of oil production is here to stay. And I think anything, if you look at the amount of investment that Canada become a global leader in sort of supplying oil to various parts of the world and the government that's in place now, the level is come, again, pushing for sort of incremental pipelines, becoming a leader in LNG. I mean all of those things are going to be incremental tailwinds to the existing book of business not only for Secure, but for any operator in Western Canada because as we've seen the macro environment when there's incremental spending in Western Canada, just provide sort of incremental tailwinds. So our perspective is we're pretty bullish on it. we don't believe oil is going away anytime soon. If anything, we think government is going to set up to be able to further sort of bolster production and become a global leader in the supply sort of of LNG and oil over the next number of years. And we had for that segment. So we think this is a very unique opportunity, and we're just in the early innings of long baseball game in terms of becoming an energy giant in Canada to supply sort of various parts of the world. And I would say the conflict in Iran has only sort of further bolstered our view. Not that, that formed any part of the view before we actually entered into this transaction, but our perspective was that only further bolsters our conviction around that.

Our next question comes Tobey Sommer from Truist.

What specifically about the transaction would help Canadian index inclusion and what could timing and net buying impact look like?

Yes. Tobey, great question. Luke speaking. So Canadian index inclusion, the next entrant a key consideration is what's your float weighted market cap. So not just your market cap, but based on your free float. Arguably, the expectation is the combination of these 2 businesses together is going to meaningfully increase our float cap -- and therefore, when the committee of the TSX 60 is evaluating next index inclusion entrants, we are that much larger of an industrial company. Based on their preferred toto metric, and industrials are an underweight component of the TSX 60. Now the unfortunate part is you don't actually know when those rebalances will happen like they do every quarter, but whether or not they're going to remove a smaller weighted company to add a larger weighted company is at the discretion of the committee. So you don't have exact certainty that, but it does materially improve waiting for purposes of the committee consideration.

And within Western Canada, - how does this transaction change internalization for that like kind of geo and portion of the company. And do you think that has the opportunity to change significantly in coming years, not just post transaction.

Yes. So Tobey, as we've been alluding to, we think there's sort of opportunities for us to bring more waste into the secure landfills as they sort of currently exist. And then as you look at the sort of trend across Canada, you have small regional landfills that continue to close and the preference is to concentrate waste volumes into more sophisticated well-capitalized landfills from majors. Does that represent future opportunities. So we are going to keep evaluating where we can internalize more. We think right out of the gate, we have the incremental waste that could go into secure landfills and augmentation of sort of landfill permits allowing for more would just represent an upside above and beyond those sort of near-term opportunities.

Our next question comes from Adam Bubes from Goldman Sachs.

As you outlined, the deal consists of 80% of TFL shares, allowing it to be leverage neutral, do you see continued opportunities to use equity issuance for M&A? Or is this a one-off?

Mostly a one-off. I mean there'll be a larger transaction where certain shareholders' management teams have an interest in taking GFL equity. But by and large, we generally prefer to use cash versus equity. Obviously, this situation is unique, but if you look at Frontier, there's basically $100 million of sort of rollover equity. But the norm is mostly just sort of using cash, and I don't expect that to change much in the future.

Got it. And then maybe one for Allen. Maybe can you just talk about the pricing algorithm for SECURE and at a high level the structure and flexibility of contracts.

Sure. No problem. Yes, I think we look at our business over the past few years, we've been raising prices on average of 5% per year. We did that in '23 and '24 and here again in 2025. And so alongside of pride, and some of our price is predicated on long-term contract. We have about 20% of our business that contracted specifically with the 10-year plus agreements. There's a CPI indicator in there, so we do every year get price on those CPI indicators as part of the contract. And then on top of that, we would have slowing growth. And as I talked about production growth being 2% to 3%, our volume growth, call it, 2% to 3%. And that we see every year. So it's a combination of both. And then as we think about these longer projects and investing capital, some of those are tied to long-term contracts, which would have some similar terms associated with them.

SP1 Our next question comes from Abraham Landa from Bank of America.

Just on the financing for this transaction. Maybe I know Secure has some existing debt and I guess what is potentially going to happen with those? And then on the bridge financing, I'm wondering if you can maybe provide some details on that bridge and maybe how much permanent that you kind of expect to raise and if that's on an unsecured basis?

Yes, thanks for the question. SECURE has $600 million outstanding across 2 notes. The likely outcome is those are sort of exchanged for GFL paper or just sort of called and sort of taken out, we'll evaluate as we get sort of closer to. I mean there's a committed bridge in place from our financing sort of partners, but I think the more likely outcome is that we access the markets, high yield being the likely place in advance of closing use available capacity under our revolver, cash on hand and incremental sort of high-yield borrowing, in order to affect the price. The math suggests you need depending on when you close, but somewhere between sort of $1.5 billion and $2 billion incremental, that's including dollars to take out the secured debt, so pro forma company would be an incremental $1.5 billion to $2 billion, depending on when you close would likely be unsecured paper as part of our transition of a cap structure that will more easily migrate to an IG cap structure. But as always, we'll be opportunistic and evaluate market windows and trying to be as efficient as possible as we can with that cost of debt capital.

That's helpful. My follow-up is -- I understand that this is not under control, but you did mention that you do foresee future credit upgrades. I guess, what have been the reaction from the credit rating agencies, just given the specialty kind -- and I guess anything timing of as you rate in the future.

Well, the timing, I'll leave that to the black box of those fine institutions. As you know, they tend to be a little bit sort of backwards looking in the look. But look, I mean, I don't think there's any debate that the enhanced financial profile of this business, both from sort of margin free cash and most importantly, free cash flow conversion and enhanced scale is highly credit positive. Right? And so the agencies will continue to sort of do their monitoring. Obviously, levels of M&A, they naturally associate with a level of integration risk that they then want to see it play out. for all the reasons Patrick articulated, we feel very, very comfortable with the level of integration risk here and do not foresee anything meaningful, but they do want to sort of see that out. So we are going to continue to build the business, generating cash, investing and building durable underlying cash flows. And I think it's inevitable that the credit rating upgrades will come and eventually IG will be obtained. As we've said, we're not sort of going to pause growth investments in order to accelerate the achievement of that sort of credit rating, but we do feel over the near to medium term, the likely outcome is credit rating upgrades and eventual IG classification.

Congratulations on transaction.

We currently have no further questions. And with that, this concludes today's call. We thank everyone for joining, and you may now disconnect your lines.

Thank you, everyone.