August 11, 2008 / 8:42 AM / in 9 years

Waste Management raises bid for Republic

NEW YORK (Reuters) - Waste Management Inc, the largest U.S. trash hauler, raised its unsolicited takeover bid for rival Republic Services Inc by about 9 percent to $6.7 billion on Monday to try to thwart Republic’s agreement to acquire Allied Waste Industries Inc.

Republic Services’ board will review the proposal and respond, company spokesman Will Flower said.

Waste Management offered $37 per share in cash, up from its original offer of $34 a share on July 14. The new bid represents a 33 percent premium to Republic’s share price prior to Waste Management’s initial bid.

Houston-based Waste Management also addressed antitrust concerns in its new bid, which Raymond James analyst William Fisher called the largest single “wild card” in the transaction.

The company said it would pay Republic a $250 million break-up fee if the deal were blocked by antitrust regulators and offered interest if the deal failed to close by a set date.

“Waste Management appears to be willing to alleviate our chief concern with the transaction, namely uncertainty of (U.S.) Department of Justice antitrust approval,” Fisher wrote.

Waste Management said it already has met with Justice Department antitrust officials to discuss its bid.

The deal would close by late 2008 or early 2009, before a new administration takes the White House, Chief Executive David Steiner told Reuters in an interview.

And while the company knows it will have to divest assets to gain approval, its advisers are confident the deal would secure government approval no matter which party’s candidate wins the presidency, he said.

That’s probably right, said Peter Anderson, director of the Center for a Competitive Waste Industry, which takes no position on which bid -- Waste Management’s for Republic, or Republic’s for Allied -- is better.


A Democratic administration could represent a slight risk factor to Waste Management’s proposal and the next administration will probably make the final decision, Anderson said.

“Clearly,” Anderson said, Republic’s bid for Allied “has fewer red flags raised by antitrust issues.”

Waste Management has about a third of the nation’s landfill and collection business. It posted 2007 revenue of $13.31 billion.

But as neither of the presumptive presidential candidates has staked a strong antitrust position, the likelihood is that a Waste Management-Republic combination would still pass muster, Anderson said.

Steiner would not discuss where he thinks the DOJ would be most likely to require divestitures.

Last month, Republic rejected the original $6.2 billion Waste Management offer, and its largest shareholder, Bill Gates’ investment arm, asked Waste Management to walk away.

Waste Management has reached out to Gates’ Cascade Investment and the Bill & Melinda Gates Foundation Trust but has yet to meet with them and hopes to do so in the near future, Steiner said.

Waste Management also said it had confirmed that financing would be available and expects to get commitment letters from lenders once it begins discussions with Republic. It said the deal would generate benefits 25 percent to 35 percent higher than its original estimate of $150 million.

In June, Republic agreed to buy Allied in an all-stock deal worth, at Republic’s current share price, $6.32 billion, or $14.63 per share.

Waste Management’s shares were down .06 percent, Republic Service’s were down 0.3 percent and Allied Waste’s shares were up 0.4 percent in midday trading on the New York Stock Exchange.

Reporting by Jessica Hall and Helen Chernikoff; Editing by Brian Moss and Steve Orlofsky

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