July 15, 2008
Waste Management Offers to Buy Republic Services
By Stephen Singer
The Associated PressWaste Management on Monday made an unsolicited offer to buy disposal company Republic Services Inc. for $6.19 billion in cash, aiming to block its biggest rivals from teaming up against the nation's largest garbage hauler.
The moved countered a deal announced in June in which the third- largest waste hauler, Republic, said it would buy Allied Waste Industries, the second-largest, in a stock combination worth $6.07 billion at the time.
But that deal's worth had declined along with Republic's share price and was valued at about $5.43 billion, or $12.56 a share, as of Friday's close.
"We are confident that after you have considered our proposal you will agree that its terms are significantly more attractive to your stockholders than the Allied transaction," David Steiner, Chief Executive of Houston-based Waste Management, wrote Monday to James O'Connor, Republic's chairman and chief executive.
Waste Management's per share offer represented a 22percent premium to Fort Lauderdale, Fla.-based Republic Services closing stock price of $27.90 on Friday. On Monday, shares of Republic closed up nearly 14 percent at $31.76.
Republic said its board of directors will review the $34 per share offer from Waste Management and respond "in due course."
Steiner told analysts in a conference call Monday that the Republic-Allied deal spurred Waste Management to make its offer.
"We did not go out looking for this deal and did not contemplate making an unsolicited offer for Republic, but when Republic was put into play as result of their agreement with Allied, we were presented with an opportunity we felt we could not ignore," he said.
Steiner said the move does not signal a return to a strategy of growth through acquisition.
"Once we close this transaction we will spend all of our time and efforts to ensure a smooth integration," he said. "We will not look to make any other significant acquisitions."
Waste Management said it was looking forward to a prompt decision on its offer and cooperation from Republic's board in presenting the deal to shareholders.
"The combination is highly complementary," Waste Management said. It expected that the pairing up of the companies would give each more operating efficiency along its collection routes, among other advantages.
If the deal ultimately goes through, Waste Management's share of the industry would rise to 30 percent from 24 percent now, said Stewart Scharf, an equity analyst at Standard & Poor's in New York.
Looking ahead, Waste Management sees the deal boosting its earnings in the first year and provide cost savings of at least $150 million.
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