UPDATE 4-Canada's GFL sells environmental services business in $5.6 bln deal to cut debt

Adds analyst comment in paragraph 8

By Anshuman Tripathy

Jan 7 (Reuters) - GFL Environmental GFL.TO said on Tuesday it would sell its environmental services division in a deal valued at C$8 billion ($5.59 billion), as the Canadian waste management company aims to pare debt and buy back shares.

The Vaughan, Ontario-based company would sell the business to private equity firms Apollo APO.N and BC Partners.

The business consists of liquid waste management and soil remediation services, including collecting and managing hazardous and non-hazardous industrial and commercial waste.

The deal comes months after activist ADW Capital Management urged GFL to sell its environmental solutions business and position itself as a pure-play waste management firm.

GFL will retain a C$1.7 billion equity interest in the business, which accounted for nearly 23% of its overall revenue in the third quarter.

"The transaction will allow us to materially delever our balance sheet, which will accelerate our path to an investment grade credit rating," GFL CEO Patrick Dovigi said.

He said the company, which has a long-term debt of C$9.52 billion, will have an option to repurchase the business within five years of the deal's closing — expected in the first quarter of 2025.

National Bank of Canada Financial Markets analyst Rupert Merer said GFL's use of asset sales for generating capital to repay debt is a positive and investors would be interested in the move.

GFL intends to use up to C$3.75 billion of the net proceeds from the deal to repay debt and make available up to C$2.25 billion for share repurchases.

The debt repayment is expected to reduce its cash interest expense by about C$200 million.

Under the deal, GFL will retain a 44% equity interest in the business, while Apollo and BC Partners will each hold 28%.

GFL reported a 4.3% rise in revenue for the nine months through September, benefiting from price hikes at the solid waste division — its biggest unit.

($1 = 1.4305 Canadian dollars)

(Reporting by Anshuman Tripathy in Bengaluru; Editing by Shilpi Majumdar and Shreya Biswas)

((Anshuman.Tripathy@thomsonreuters.com))