Date: August 11, 2008
Source: News Room
Waste Management, Inc., as expected, increased its unsolicited cash offer for rival Republic Services, Inc. by nearly 10% to $6.73 billion or from $34 per share to $37 per share, and has proposed to pay Republic a fee of $250 million if the two companies are unable to close a transaction in the event that the U.S. Department of Justice opposes the deal. Waste Management said that its new offer represents a premium of 32.6% over Republic's closing stock price on July 11, 2008, the last trading day prior to Waste Management's announcement of its initial offer. Republic Services, which had previously reached an agreement to merge with Allied Waste Industries, Inc., responded to Waste Management's new offer by saying that it will "carefully review" the proposal "consistent with its fiduciary duties." Allied Waste Chairman and CEO John Zillmer was less reserved in his response, however. "Despite strong opposition from its own shareholders and other constituencies, and the severe antitrust regulatory and financing challenges associated with its unsolicited proposal to acquire Republic, Waste Management is pushing ahead with its attempt to disrupt our two companies' strategic plans with another offer that pales in comparison to the significant value that will be generated through the combination of Republic and Allied," Zillmer said in press release."
If successful, Waste Management's acquisition of Republic would create a trash juggernaut with annual sales of more than $16 billion, or about $10 billion more revenue than the nearest competitor. The company would control nearly half of all permitted landfill capacity in the U.S.
Waste Management said it expects to achieve cost savings 25% to 35% higher than the company's original estimate of $150 million. That compares with the $150 million in annual savings Republic and Allied have said their deal would create.
Waste Management believes it will be able to maintain its investment-grade credit rating after the transaction.
There is concern that regulators with the Justice Department might block or require significant divestitures of assets as a condition of the merger; however, Waste Management executives have met with Justice Department officials and are confident that the deal will meet regulatory requirements.
Republic rejected Waste Management's first offer as both too low and ill-conceived. This had been echoed by its largest shareholder, BGI, the investment firm that manages money for Bill Gates and the Bill & Melinda Gates Foundation Trust. BGI owns a 15.7% stake in Republic and a 2.3% stake in Waste Management.
See also: www.wasteinfo.com/news/wbj20080813B.htm.
See also: www.wasteinfo.com/news/wbj20080813C.htm.
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