So Much for summer being a slow time for news.
In late June, Fort Lauderdale, Fla.-based Republic Services reached an agreement to acquire Phoenix-based Allied Waste. Under the terms of the all-stock transaction, estimated to be worth more than $6 billion, Allied stockholders will receive 0.45 Republic shares for each Allied share they own.
The blockbuster deal, which would combine the industry's second- and third-largest hauling firms, is expected to close in the fourth quarter, pending shareholder and regulatory approval. To complete the transaction, Republic will issue 198 million shares of common stock to Allied shareholders, which will give them an approximate 52 percent ownership stake in the combined company.
The combined company will be named Republic Services and will be headquartered in Phoenix.
In the latest Waste Age 100 ranking of the largest solid waste companies, Allied ranked second, with $6.07 billion in revenue in 2007. Republic ranked third, with $3.18 billion in revenue last year. Houston-based Waste Management topped the list with $13.31 billion in 2007 revenue.
James O'Connor, chairman and CEO of Republic, will retain the same titles with the new company. Likewise, Allied's president and COO Don Slager will keep his titles with the new company, as will Republic's CFO Tod Holmes.
Republic and Allied say the combined company will have annual revenues of more than $9 billion. The new company also will employ 35,000 workers and service more than 13 million customers in 40 states and Puerto Rico.
“By combining the strengths of two great companies and integrating executives from both teams, Republic will enhance its leadership position in the U.S. environmental services industry, building on both companies' foundations of profitable growth,” said O'Connor in a press release.
“Our two companies have known and respected each other for many years, and the time is right for us to take the next logical step in the development of both companies, thus accelerating our ability to achieve our strategic objectives and enhancing our plan for profitable growth,” said John Zillmer, chairman and CEO of Allied, in a press release. Zillmer has said that he and Allied CFO Peter Hathaway will leave when the deal closes.
Jonathan Root, an analyst for New York-based Moody's Investors Service, says the combination of the two companies would create a stronger competitor in the industry and is a logical step in industry consolidation. He also says the move is not about revenue growth; instead, it is more of a synergy play for the combined company to achieve greater efficiencies than the two companies could do on a stand-alone basis.
Bruce Parker, president and CEO of the Washington-based National Solid Wastes Management Association (NSWMA), says the deal should be an overall positive for the industry. “We've gone through these surprises before,” he says, referring to acquisitions and mergers between the industry's larger companies, such as the 1999 deal in which Allied purchased BFI. “It shakes up the industry, but, in the end, the results are usually a positive.”
The new Republic Services will offer strong competition to the industry's largest company, Houston-based Waste Management, Parker adds. In addition, he says that some independent companies also will benefit from the acquisition by picking up subsidiaries that the Justice Department may require Allied and Republic to shed as part of the deal.
However, in losing one of its three biggest members, NSWMA faces the challenge of finding a way to make up for lost dues and voluntary revenues essential to supporting the association's programs. Parker says he is hopeful that securing a commitment from the new Republic Services will resolve those concerns.
Waste Age will feature continuing coverage of this transaction and any further developments in future issues.