Republic Services bid for Allied Waste strengthens

A combination of Republic and Allied, the nation's second-largest trash hauler, would establish a company with annual revenue of $9 billion, close on the heels of No. 1 Waste Management Inc., a Houston-based company with revenue of $13 billion last year.

Waste Management had proposed a $6.73 billion buyout for Fort Lauderdale, Fla.-based Republic in what some analysts said was an effort to derail the Republic-Allied deal. Combined, Waste Management-Republic would be a nearly $16.5 billion-a-year enterprise, dwarfing Allied, a Phoenix-based company that reported 2007 revenue of about $6.1 billion.

In a Securities and Exchange Commission filing Thursday, Republic said it was contacted on Sept. 25 by a Waste Management representative who said it continued to be interested in a tie-up with Republic, but "acknowledged that the current credit market environment made acquisition debt more expensive and a transaction less attractive to Waste."

However, Waste Management said it expected financing for the deal was available, and would pursue antitrust clearance for the deal.

The Waste Management representative also "expressed an interest in buying any assets that would be divested as a result of a Republic-Allied combination, if the Republic-Allied merger went forward," according to Republic's SEC filing.

Analysts promptly noted the significance of the filing, with David Feinberg of Goldman Sachs and Brian Butler of Friedman, Billings, Ramsey saying a Republic-Allied deal now appears more likely than a Waste Management-Republic combination.

Republic shares fell $1.33, or 4.5 percent, to close at $28.08, Waste Management stock climbed 54 cents to finish at $31.58 and Allied shares slipped 29 cents, or 2.6 percent, to end at $10.99.