Waste Management tries to scuttle Republic-Allied Waste deal with $6.2 billion offer for the latter

15 July 2008

Waste Management Inc. yesterday bid $34 a share in cash to acquire Republic Services Inc., saying its offer to buy the company at a 22 per cent premium is superior to Republic's $6 billion plan to buy it.

In one broad stroke, the potential acquirer has ended up as a possible seller – a situation intentionally created by No.1 waste hauler Waste Management to prevent a formidable rival in a combination of No.2 Allied Waste and No.3 Republic. (See: No 3 US waste hauler Republic to acquire larger rival Allied Waste in $6.24-billion deal)

Waste Management CEO David Steiner is trying to maintain the company's size advantage in an industry affected by rising fuel costs and a weakening economy that has reduced demand for construction-waste removal. The trash hauler and its rivals have cut unprofitable routes and added fuel surcharges to stay competitive.

"Our industry is extremely competitive and capital intensive," Steiner said. As such, he said a deal with Republic would complement Waste Management's assets and allow the combined company to be more streamlined than the companies could be on their own.

Waste Management said its $6.2 billion offer "clearly offers a better and more certain value alternative", being more favorable to Republic's stockholders than the proposed Republic-Allied combination and is "reasonably capable of being completed on a timely basis."

Steiner said that since Waste Management operates in all except one of Republic's 20 markets, cost cutting and operations integration would be easier with a tie-up between them. ''This is a series of 20 deals in 20 of our market areas, and so the local management is able to get those synergies out very easily,'' he said.