Credit squeeze ends WM's $6.73-billion hostile bid for Republic
14 Oct 2008
The current credit squeeze seems to have stymied another potential big-ticket acquisition. Waste Management Inc., the largest US trash haulier, withdrew its $6.73 billion hostile offer for competitor Republic Services Inc. because current market conditions make the acquisition too financially risky.
All this after waging a long battle with Republic to prevent it from tying up with Allied Waste to create a formidable rival to Waste Management's superiority in the sector. Currently, Waste Management, Allied Waste and Republic are the top three operators in this sector, in this particular order. (See: Waste Management tries to scuttle Republic-Allied Waste deal with $6.2 billion offer for the latter)
Although Waste Management cited the difficult economic environment as justification for dropping the bid, Republic Services has never been receptive to the takeover. Republic has consistently declined Waste Management's offer in favor of acquiring Allied Waste Industries. Waste Management's bid was seen as an attempt to dash the deal, and even its sweetened offer of $37 a share, up by roughly half a billion dollars from the initial offer, couldn't sway Republic.
"Given the current state of the financial markets, we believe that it would not be prudent to continue to pursue the acquisition of Republic," said Waste Management CEO David Steiner. "Our third-quarter results reflect that our actions over the past five years continue to pay off, and this progress will position us well to continue to perform even in an economic downturn," he added.
Republic last month secured $1.75 billion in guaranteed loans for its proposed merger with Allied Waste, Republic spokesman Will Flower said. The companies will ask shareholders to approve the $6.2 billion transaction in separate meetings on 14 November, and the takeover is expected to close in the fourth quarter, he said.(See: No 3 US waste haulier Republic to acquire larger rival Allied Waste in $6.24-billion deal)
''The merger between Republic and Allied Waste represents the best value for shareholders,'' Flower said yesterday. ''We will continue to move forward without the distraction of the Waste Management proposal.''
Waste Management said cash flow and receipts remain strong and that it has $500 million of cash and liquid investments in US government securities. The company said third-quarter profit was above analysts estimates.
Investors on all sides seemed pleased by the decision. Shares of Allied Waste rose by $1.44, or 16.9 per cent, to $9.98, during Monday's afternoon trading session and Republic Services was ahead by $1.00, or 4.4 per cent, at $23.50, after trading as high as $24.65. Waste Management's stock gained $3.49, or 13.6 per cent, to $29.25.