As the Can Turns

Chris Carlson

In Late August, Houston-based Waste Management received a second request from the U.S. Department of Justice for more information regarding the company's antitrust filing in July to acquire Republic Services, Fort Lauderdale, Fla.

The filing, made July 24, in compliance with the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, indicated Waste Management's desire to buyout Republic by acquiring its shares of common stock on the open market.

Waste Management officials say the company has been in regular communication with the federal government since the HSR filing and intends to promptly respond to the most recent request.

The HSR filing was made after Republic rejected Waste Management's initial, unsolicited $6.2 billion buyout offer of $34 per share of common stock. Republic officials said the offer significantly undervalued the company.

The filing was seen as the beginning of a hostile takeover attempt, and Republic responded by adopting what is commonly referred to as a poison pill plan.

The plan would penalize companies that acquire more than 10 percent of Republic's stock unless the company's board of directors approves the purchases. Companies that already own more than 10 percent are prohibited from acquiring more than 20 percent of Republic's stock without the board's permission.

In mid-August, Waste Management made a second offer of $37 per share, which also was rejected because Republic officials, again, said it undervalued the company and did not address concerns raised by Republic board members after the first offer.

Throughout the entire process, Republic has reiterated its intentions to move forward with its acquisition of Phoenix-based Allied Waste.

In June, Republic announced an agreement to acquire Allied, which would combine the industry's second- and third-largest hauling firms. The all-stock transaction, estimated to be worth more than $6 billion, would give Allied stockholders 0.45 Republic shares for each Allied share they own.

In August, Republic secured commitments from a syndicate of lenders, arranged by Bank of America Securities and J.P. Morgan Securities, to cover its new $1.75 billion senior unsecured revolving credit facility. The new facility will be coupled with Republic's existing $1 billion facility to consummate the Allied acquisition, which is scheduled to close in fourth-quarter 2008.

According to a letter to David Steiner, CEO of Waste Management, from Republic's board of directors, Republic says the Allied merger creates greater value-generating opportunities and cost-saving synergies.

“Our shareholders have expressed to us, privately and publicly, their appreciation of the potential value of the Republic-Allied Waste merger,” according to the letter. “Based upon our contacts with shareholders, our board believes that Republic shareholders would not want that potential value sold on the cheap.”

Waste Management has released a statement reflecting its disappointment with Republic's latest rejection.

“We continue to believe that our revised proposal would provide superior value to Republic stockholders and, with Republic's cooperation, would be executable on a timely basis,” according to the statement.