“We are pleased the required regulatory approval from the Competition Bureau has been obtained, enabling us to successfully close this transaction with R360,” said Rene Amirault, Chief Executive Officer of SECURE. “This asset sale fortifies our financial position, underscores the intrinsic value of our business, and we’re confident it will enhance shareholder value while solidifying SECURE’s leadership position in the waste management and energy infrastructure sector. The Transaction materially improves our financial position and capital allocation flexibility, allowing us to concentrate our resources and deploy capital in key areas of growth for SECURE.”
The Transaction highlights include:
- $1.15 Billion All-Cash Sale: Proceeds for the Transaction includes $1.075 billion in cash plus approximately $75 million for certain adjustments as provided in the definitive Transaction agreement for total estimated cash proceeds of $1.150 billion.
- Accretive Value: The third-party ordered sale at an accretive multiple highlights the underlying value of the business and underscores a disconnect between this and SECURE’s current trading multiple.
- Financial Flexibility: The Transaction provides immediate liquidity for debt repayment, while maintaining substantial leverage capacity and a surplus of cash available for shareholder returns and to fund growth initiatives. SECURE will repay the entire balance drawn on the Corporation’s Revolving Credit Facility, and expects to provide notices of redemption to holders of its outstanding US$153 million aggregate principal amount of 11% Senior Second Lien Secured Notes due 2025 next week.
The Corporation remains the market share leader of industrial and energy waste infrastructure in western Canada and North Dakota. SECURE’s business is poised to deliver robust margins and a stable cash flow profile, supported by recurring volumes in industrial waste, metals, and energy markets. The Corporation’s 2024 Adjusted EBITDA is expected to range from $440 – $465 million.
SECURE’s Board of Directors and management believe there continues to be a substantive disparity between SECURE’s share price and the fundamental value of the business. The Transaction, despite being an ordered sale, underscores this disconnect, and supports a value above this benchmark. As such, the Corporation remains committed to aggressive share repurchases under the Normal Course Issuer Bid (“NCIB”) and will evaluate various avenues available to return capital to shareholders following the Transaction closing, which may include consideration of the merits of a substantial issuer bid based on, among other things, market conditions, the discretion of the Board of Directors, compliance with debt covenants and financial performance at the applicable time. Since commencing the NCIB on December 14, 2023, the Corporation has repurchased and cancelled 7,278,100 common shares, representing 2.5% of SECURE’s outstanding common shares, and 31% of the maximum shares allowable under the terms of the NCIB.
SECURE remains dedicated to working closely with R360 to ensure a smooth transition. R360 is an affiliate of Waste Connections Inc. (TSX/NYSE: WCN) (www.wasteconnections.com), an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, including by rail, along with resource recovery, primarily through recycling and renewable fuels generation. Waste Connections serves approximately nine million residential, commercial and industrial customers, in mostly exclusive and secondary markets across 44 states in the United States and six provinces in Canada. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. The Transaction provides Waste Connections with a growth platform in the Canadian market, leveraging its expertise in waste handling, recovery and disposal, and complementing its existing U.S.-based, non-hazardous oilfield waste operations.
With the Transaction complete, SECURE’s focus will be to progress the pursuit of our strategy as one of Canada’s sector-leading waste management and energy infrastructure organizations. Allen Gransch, President of SECURE, remarked “Despite the challenging circumstances, this divestiture highlighted the underlying value of SECURE’s infrastructure-based business that provides stable recurring revenue while generating significant free cash flow. I’d like to thank the 250 employees associated with the divestment for their hard work and dedication to SECURE over the years and wish them all the best with R360.”
SECURE expects to release its 2023 fourth quarter and year-end financial and operating results before markets open on Monday, February 26, 2024. Financial Statements and Management’s Discussion and Analysis will be posted to SECURE’s website and SEDAR+ following the release.
SECURE will host a conference call Monday, February 26, 2024, at 9:00 a.m. MST to discuss the fourth quarter results.
To participate in the conference call, dial 416-764-8650 or toll free 888-664-6383. To access the simultaneous webcast, please visit www.secure-energy.com. For those unable to listen to the live call, a taped broadcast will be available at www.secure-energy.com and, until midnight MST on Monday, March 4, 2024, by dialing 1-888-390-0541 and using the pass code 876018.
The Corporation uses accounting principles that are generally accepted in Canada (“GAAP”), which includes International Financial Reporting Standards (“IFRS”). This press release contains a supplementary non-GAAP financial measure, being Adjusted EBITDA, which does not have a standardized meaning as prescribed by IFRS.
Adjusted EBITDA is calculated as net income, adjusted for income tax, depreciation, depletion and amortization, interest, accretion and finance costs, share-based compensation, and other items the Corporation considers appropriate to adjust given the irregular nature and relevance to comparable operations.
This measure is intended as a complement to results provided in accordance with IFRS. The Corporation believes this measure provides additional useful information to analysts, shareholders, and other users to understand the Corporation’s and the Facilities financial results, profitability, cost management, liquidity and ability to generate funds to finance its operations.
However, this measure should not be used as an alternative to IFRS measures because it is not a standardized financial measure under IFRS and therefore might not be comparable to similar financial measures disclosed by other companies. For further details on the Corporation’s use of non-GAAP financial measures (including relevant reconciliations and explanations of their respective use and composition), see the “Non-GAAP and other specified financial measures” section of the Corporation’s management’s discussion and analysis for the three and nine months ended September 30, 2023 and 2022, which is incorporated by reference herein and available on SECURE’s profile at www.sedarplus.ca and on the Corporation’s website at www.secure-energy.com, for further details on the Corporation’s use of non-GAAP financial measures.