MR. Adam Wyden of ADW Capital reports

ADW CAPITAL MANAGEMENT SENDS LETTER TO GFL ENVIRONMENTAL'S BOARD AND MANAGEMENT REITERATING CALL TO UNDERTAKE A STRATEGIC REVIEW PROCESS

ADW Capital Management LLC, which owns 1.65 million shares of GFL Environmental Inc. together with its affiliates, has issued an open letter to GFL's board of directors and management team regarding opportunities to maximize value for all shareholders, and reiterating its call for the company to undertake a strategic review process. A full copy of the letter is below.

June 12, 2024

GFL Environmental Inc.

100 New Park Place, Suite 500

Vaughan, Ont., Canada, L4K 0H9

Attention: board of directors and management

Dear members of the board and management:

ADW Capital Management, together with its affiliates, are significant and long-term shareholders of GFL Environmental, currently owning 1.65 million of the company's shares. We begin this letter with the same quote that we began our last letter with: "The definition of insanity is doing the same thing over and over again, and expecting a different result." ADW Capital has been a shareholder of the company since shortly after its initial public offering (IPO), and, in many ways, today GFL is a substantially improved company, yet its valuation and discount to peers is exactly the same or worse.

Not much externally has changed since we wrote to the board roughly seven months ago in November, 2023. Before an impatient third party likely leaked their interest in the company's environmental solutions division (ES), the company's shares were trading at roughly 9.5 times our estimate of 2025E EBITDA (earnings before interest, taxes, depreciation and amortization) -- the largest discount to the broader North American waste industry since the IPO.

But the company's persistent undervaluation has not forestalled the company's largest shareholder -- B.C. Partners -- from doing its seasonal follow-on offering. Not to mention, B.C. Partners has recently rubber stamped a new retention compensation program for company management ahead of an even more robust PSU (performance share unit) program that the company's board of directors and management has been working on so assiduously.

It is very simple -- it appears to us that the board and management do not care about creating shareholder value in the short, intermediate and possibly even long term. From recent actions, we believe the board and management have clearly shown they are more focused on themselves and are not aligned with minority shareholders.

The third party likely leaked their interest to show that there is an alternate path for the company's shareholders that both creates immediate value and sets up the company for long-term success. As set forth below, we believe the sale of ES at a 14 to 15 times EBITDA multiple, as rumored in the press, would have a multipronged benefit to the company:

1. By our estimates, the sale of ES will result in minimal tax leakage and leave the company with the lowest leverage in the broader North American waste industry at roughly one times before capital allocation.
2. A sale of ES would create a solid-waste pure-play when paired with the company's RNG (renewable natural gas)/EPR (extended producer responsibility)/tuck-in program that would likely have a better go forward growth algorithm, and potentially trade at a higher multiple than the company's often mentioned pure-play peer -- Waste Connections (WCN). Various sell-side reports have cited NewCo would likely trade at approximately 15 times PF (pro forma) 2025 EBITDA, but, internally, we would not be surprised if the company could trade at 16 to 17 times PF 2025 EBITDA with the right capital/margin structure -- in line with WCN.
3. GFL's new business mix would be solidly United States-centric and open up a path to a U.S. domicile and listing. GFL has long been reviled by Canadian investors, who eschew leverage and have historically been skeptical about the owner-operated attitudes of the company. While we understand the company has publicly communicated the merit of joining the TSX60, we do not expect that to happen any time soon. We believe the U.S. is where the company belongs, with more open-minded investors, and a far deeper base of passive capital and opportunities for multiindex inclusion for which the company would immediately qualify.
4. But, most importantly, the sale of ES allows the company to remove most, if not all, of the overhang from their lead sponsor, B.C. Partners, which has shown a willingness to sell the stock at basically any price/multiple of NTM (next 12 month) EBITDA. We think the company can comfortably sit in the 2.75 times range of NTM EBITDA, and repurchase the vast majority of B.C. Partners' stake and facilitate a swap on the remainder if need be.

In summary, a lower-leverage pure-play listed/domiciled in the United States with no sponsor overhang has a shot at trading at approximately 16 times 2025 PF EBITDA and, based on our estimates, assuming an approximately 70 per cent repurchase of B.C. Partners' total stake (representing 65 million shares), would result in GFL's shares trading at up to $65 (U.S.).

We cannot think of any reason why the company would explore any other path than to sell its ES division. While we would be in favour of an outright sale of the entire company, we recognize the scope and scale of such a transaction. Given the minimal tax leakage, the company does not lose much by doing a two-step take private in our view, and leaves the door open to see if the company can achieve a true public company cost of capital that a business of this quality merits.

While we understand that management has said publicly all options are on the table, we believe management's preferred solution is a sponsor-to-sponsor swap of public equity absent a sale of ES. This belief is driven by management's historical focus on growth/perceived desire to run a larger business. We believe a sponsor-to-sponsor sale accomplishes absolutely nothing and is detrimental to shareholders. A new sponsor might not actually be aligned with minority shareholders and would prefer the shares trade at a discount ahead of a future take private it may inevitably end up leading.

Let us remind you, the board has a fiduciary obligation to maximize value for all shareholders and, at this juncture, we could argue that there could be legal consequences for not pursuing real offers for all or some of the company's assets.

We encourage the company to finally do the right thing for minority and majority shareholders, and immediately engage a financial adviser to pursue a sale of the ES division or the entire company.

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.

We look forward to hearing from you.

Best regards,

Adam Wyden

ADW Capital Management LLC