Republic rejects Waste Management takeover offer

By Helen Chernikoff

NEW YORK (Reuters) - Trash hauler Republic Services Inc (RSG.N: Quote, Profile, Research) and its biggest shareholder rejected a $6.2 billion takeover offer from industry leader Waste Management Inc (WMI.N: Quote, Profile, Research) on Friday and stood by its deal to acquire Allied Waste Industries Inc (AW.N: Quote, Profile, Research).

Republic said its board decided unanimously the Waste Management offer was less favorable to Republic shareholders than the Allied deal, a view echoed by Cascade Investment and the Bill & Melinda Gates Foundation Trust, which owns 15.6 percent of Republic.

"At $34 per share, Waste's unsolicited cash offer significantly undervalues the business of Republic," said BGI, the investment office that manages Cascade's and the Trust's assets, in a statement. "BGI views the Waste proposal as designed to impede the pending transaction between Republic and Allied Waste Industries."

The BGI statement is "a major speed bump, if not game over," for Waste Management, said an arbitrageur who declined to be named.

Waste Management's $34-a-share offer for Republic represented a 22 percent premium over Republic's pre-offer share price. But the bid was below Republic's 52-week high of $35 and Republic's shares traded above the offer price as recently as June 13, BGI said.

Deep-pocketed Waste Management, which in 2007 returned $1.9 billion to shareholders through stock buybacks and dividends, will likely boost its bid, analysts said.

Cascade and the Gates Trust also owns 2.3 percent of Waste Management.

"The feeling I got is that Waste Management is open to raising their bid," said Gabelli & Co analyst Tony Fritz, who spoke with Waste Management leadership on Thursday. "I would be surprised if we don't hear more from them."