Waste Management has raised its unsolicited buyout offer for Republic Services by 9 percent to $6.73 billion, escalating a takeover battle among the nation’s largest trash haulers.
Monday’s sweetened offer of $37 a share comes less than a month after Waste Management, the nation’s largest trash collector, offered to buy No. 3 Republic in an all-cash buyout worth $34, or about $6.19 billion.
That bid was quickly rejected by Republic, which said the offer undervalued the company and was an attempt to disrupt its own plans to buy another waste hauler.
Republic had agreed earlier this summer to buy Scottsdale-based Allied Waste for $6.07 billion in a stock deal, creating a company with revenue nearly as large as Waste Management’s.
Waste Management’s latest buyout offer represents a 32.6 percent premium to Republic’s closing stock price on July 11, the last trading day before Houston-based Waste Management announced its first offer for Republic.
“We believe our proposal is clearly superior for Republic’s stockholders and is designed so we can work cooperatively with Republic,” said David Steiner, chief executive of Waste Management, which expects the acquisition to give it a boost in the first year after closing.
Waste Management also expects greater savings from the deal than it did a month ago, estimating about 25 percent to 35 percent more than its first estimate of $150 million.
The combined companies can lower costs in nearly half the markets where they both operate. Waste Management said that by consolidating landfills it could eliminate or reduce the distance of truck routes that would lead to lower fuel costs. Ordering equipment and supplies also would be reduced as the companies combine resources. “We asked for savings ideas from 20 markets. They came back to us with numbers,” Steiner said in an interview, referring to just under half of the 45 markets where the companies overlap.
Republic Services said its board of directors will review the new proposal and respond.
Allied Waste Industries, fighting to keep its deal with Republic intact, said Waste Management’s latest offer would eliminate competition in many areas in the United States.
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,” it said.
Under the new deal, Waste Management would pay its Fort Lauderdale, Fla.-based rival $250 million and increase its per-share price if the companies fail to close the deal over antitrust problems.
“We don’t expect that ever to have to be paid,” Steiner said.
Waste Management, which has said a deal could close by early 2009, believes its lawyers will easily win regulatory clearance from the U.S. Department of Justice, he said.
Waste Management also said its proposal represents less of a regulatory risk to Republic’s stockholders than the proposed Republic-Allied deal. Combined, Waste Management-Republic would be a nearly $16.5 billion-a-year enterprise, dwarfing No. 2 Allied Waste Industries, which reported revenue last year of about $6.1 billion.