Merger deals wither as credit dries up

By Helen Chernikoff

NEW YORK (Reuters) - Trash hauler Waste Management Inc (WMI.N: Quote, Profile, Research) and manufacturer United Technologies Corp (UTX.N: Quote, Profile, Research) both withdrew multibillion-dollar acquisition offers on Monday as the global market tumult, a drying up of credit and resistance from targets continued to roil deals.

Waste Management walked away from its $6.7 billion bid to buy No. 3 trash hauler Republic Services Inc (RSG.N: Quote, Profile, Research), citing "the current state of the financial markets," while United Tech rescinded its $2.64 billion bid for Diebold Inc (DBD.N: Quote, Profile, Research), a maker of automated-teller machines.

Republic and Diebold rejected their respective offers as too low. But these are also the latest in a series of deals to hit a roadblock as the economic slowdown makes buyers wary, targets less attractive and financing harder to come by.

"There is a business slowdown. So it affects the target, it affects the acquirer," said Morton Pierce, chairman of law firm Dewey & LeBoeuf's mergers and acquisitions group. "Rather than being in an acquisitive mode, people may be more focused on their own business."

The loan market is essentially frozen right now, with Friday's 3-month Libor rate at its highest level since last December.

The rate, which reflects the price banks are paying to secure funding through the end of the year, has jumped amid the pressure in the financial markets.

Of the 36 biggest pending U.S. deals, 29 have arbitrage spreads of more than 10 percent, indicating that investors are betting the deal will not close.

A LOT OF GARBAGE