HOUSTON - Waste Management Inc., the nation's largest garbage hauler, on Monday withdrew its $6.73 billion bid to acquire smaller rival Republic Services, saying the move wouldn't be prudent given current financial market turmoil.
The announcement ends a 3-month takeover struggle that began in July when Houston-based Waste Management first offered to buy rival Republic Services Inc., the nation's No. 3 trash hauler, and continued when Waste Management sweetened its takeover bid in August.
The moves were seen as an effort to derail an earlier deal agreement between Republic Services and Allied Waste Industries Inc., the second-largest player in the industry.
On Monday, Waste Management said it won't risk its strong financial position to engineer a hostile takeover.
Waste Management Chief Executive Officer David Steiner said the credit crisis motivated Waste Management to drop its bid.
"Quite frankly, it came down to the credit markets," he said in an interview. "We're certainly not willing to pick up assets at any price or if we believe it would create undue risks to our business model."
In August, Waste Management raised its buyout offer to $37 a share after Republic swiftly rejected an earlier $34-per-share bid, saying it undervalued the company and was an attempt to disrupt its own acquisition plans.
The $6.73 billion offer represented a nearly 33 percent premium to Republic's closing stock price on July 11, the last trading day before Waste Management announced its first offer. Republic at the time said it believed its proposed combination with Allied offered more value and certainty for shareholders and was moving forward with that deal.
On Monday, Will Flower, spokesman for Republic Services in Fort Lauderdale, Fla., said Republic Services and Allied Waste Industries Inc. are moving along with their plans to combine operations. The companies expect to close the deal in mid-December.
"The announcement today from Waste Management clearly takes another obstacle out of the way," he said.
James Zeumer, spokesman for Allied Waste, said Waste Management's decision allows the two smaller companies "to focus on the integration process."
Stewart Scharf, an analyst at Standard & Poor's in New York, said the rapidly deteriorating credit market forced Waste Management to act.
"I thought that if they were to present a new proposal it would probably have to be restructured to include stock based on current market conditions," he said. "It would be difficult to maintain an investment grade rating, which is important to them."
Shares of Waste Management traded at $28.79 in early Monday trade, up $3.03, or nearly 12 percent. For the year, they've ranged between $39.44 and $24.51.
Combined, Waste Management-Republic would have been a nearly $16.5 billion-a-year enterprise, dwarfing Allied, which reported 2007 revenue of about $6.1 billion.
Republic Services shares gained 52 cents, or 2.3 percent, to $23.02 and Allied Waste jumped $1.26, or nearly 14.7 percent, to $9.80.
Also Monday, Waste Management forecast earnings of 62 cents per share for the three months ended in September. Excluding one-time items, it predicts profit of 62 cents or 63 cents per share.
Analysts surveyed by Thomson Reuters, on average, expect 60 cents per share. Those estimates typically exclude one-time items.