Waste Management still gunning for Republic

The garbage industry was at it again today, with Houston's Waste Management (NYSE: WMI), the No. 1 waste and environmental services firm in the U.S., again professing its desire to grab the No. 2 company, Fort Lauderdale, Fla.'s Republic Services (NYSE: RSG).

The move comes just days after Waste Management announced a Hart-Scott-Rodino filing for its continued intention to acquire Republic (see Takeovers, buyouts and bankrupty).

Waste Management's shares were down 1.65 percent at $35.16 in late day trading, with Republic's shares also dropping, down by 1.77 percent to $32.13. Allied Waste also took a hit today, falling 1.12 percent to $11.48.

Republic has already rejected Waste Management's offer, saying it's committed to its deal with Phoenix-based Allied Waste Industries (NYSE: AW), which will combine the No. 2 and No. 3 firms in the industry (see Republic says no to Waste Management).

"As we stated in our response, we believe our merger with Allied Waste is in the best interests of our stockholders, because it creates significant value generating opportunities," said Jim O'Connor, chairman and CEO of Republic Services, in the company's second quarter conference call.

In addition to landfill and garbage collection services, all three companies have significant recycling operations, as well as landfill gas to energy and waste to energy operations.

Waste Management made a $34 per share all-cash offer for rival Republic earlier this month in reaction to Republic's Allied Waste deal. Republic and Allied announced their merger plans in June, with the deal valued at over $6 billion in Republic stock at the time (see Republic to buy Allied Waste for over $6B in stock).

Waste Management said that it is "working diligently" to respond to Republic's rejection, saying that it plans to address all of the issues raised by Republic's board.

But Republic's board has already made its own moves, adopting a poison pill earlier today that will block anyone from buying more than 10 percent of Republic's stock without board approval. For anyone already holding 10 percent of Republic, the new rule blocks the acquisition of more than 20 percent of Republic shares.

Two groups received special clearance for bulking up on Republic stock, up to a point, but those exceptions are unlikely to help Waste Management.

Republic said Cascade Investment and the Bill & Melinda Gates Foundation Trust, which have reportedly said that they do not support the bid from Waste Management, have a waiver to acquire up to a total of 20 percent of its stock. Cascade and the Gates Foundation Trust have been long term stockholders of Republic and currently own 15 percent of the waste company's outstanding shares.

In his rejection of the Waste Management offer, O'Connor said a transaction with the industry leader would involve significant additional regulatory complexities versus a merger with Allied, and noted the fact that Waste Management has not yet obtained financing commitments for the more than $6 billion of cash needed to complete the proposed deal.

For Republic's deal with Allied, O'Connor said Republic received a statutory request for additional information from the U.S. Department of Justice on the merger, but that it was "nothing out of the ordinary."

"The integration planning build that we're going through is looking for day one readiness Oct. 1, just in case we get an early release from the Department of Justice," he said.

Under the terms of the Republic and Allied merger, Allied shareholders will receive 0.45 shares of Republic common stock for each Allied share. Republic said it will issue approximately 198 million shares to Allied shareholders, giving them 52 percent ownership of the combined company.

Republic and Allied expect to close their deal by the fourth quarter of this year.