Republic Services makes $6.8 bln bid for Allied Waste
LOS ANGELES (Reuters) - Trash company Republic Services Inc (RSG.N) is in talks to buy competitor Allied Waste Industries Inc AW.N in an all-stock deal worth about $6.77 billion, the companies said on Friday.
The acquisition would unite the No. 2 and No. 3 U.S. waste haulers to compete with industry leader Waste Management Inc WMI.N.
Mortgage troubles and slower consumer spending are hurting many industries. But "Trash doesn't stink in this economy," Goldman Sachs analyst David Feinberg said in a Thursday note raising his rating on the sector to "Attractive." He assigned a "Buy" rating to Allied shares.
Under the terms of the proposal, Allied Waste shareholders would receive 0.45 shares of Republic Services common stock, the companies said in a statement without any additional detail.
At Friday's closing price, the offer is worth $15.23 per share to Allied. That is only a 1 percent premium to Allied's closing price on Friday but a 9.4 percent premium to the price at Thursday's close.
As of March 31, the weighted average common and common equivalent shares of Allied Waste outstanding were 444.2 million.
Republic Services is the most richly valued of the three top trash companies but the smallest by revenue, while Allied is the slowest grower and has the lowest price to earnings.
Republic trades at a multiple of 18.5 times estimated 2008 earnings, while Allied trades at a comparable multiple of 15.1. That compares with Waste Management's multiple of 17.5.
Waste Management's 2007 revenue was $13.3 billion, versus Republic's $3.2 billion and Allied's $6.1 billion. That puts the combined company at $9.3 billion.
Goldman's basket of six municipal solid waste stocks as of Thursday was up 15 percent year-to-date, and Feinberg said he expects trash haulers to see volume declines to diminish and to enjoy continued pricing power.
He also said Allied was best positioned to benefit from those factors.
Shares in Republic Services closed up 19 cents to $33.85. Allied Waste shares finished up $1.08, or 7.8 percent, at $15. Waste Management closed up $1.20, or 3.2 percent to $39.06. All three companies trade on the New York Stock Exchange.
(Reporting by Patrick Fitzgibbons, Helen Chernikoff, Peter Henderson, Lisa Baertlein, Megan Davies and Alexandria Sage; editing by Mark Porter and Carol Bishopric)
