Trash hauler Republic Services said on Friday its board prefers an existing agreement to buy Allied Waste Industries to a takeover proposal from Waste Management.
The board decided unanimously that the Waste Management offer is less favorable to Republic shareholders and that its recommendation of a merger with Allied Waste stands. Republic will not furnish information to, or hold discussions with, Waste Management, the company said.
Waste Management was not immediately available to comment.
In June, Republic and Allied reached an all-stock takeover deal under which Allied shareholders would receive about 0.45 share of Republic common stock for each Allied share, valuing Allied at about $6.32 billion, or $14.63 per share based on Thursday's closing prices, a 23.7 percent premium.
The combination of No. 2 Allied and No. 3 Republic would create a company with $9 billion in annual revenue, trailing only Waste Management, whose 2007 revenue totaled $13.3 billion. Its next largest rival would be Waste Connections, which generated revenue of $958.5 million last year.
Waste Management already dominates the market, holding about a third of the nation's trash collection and landfill capacity. A Waste Management-Republic combination would have about 40 percent of the market, estimates FBR Capital Markets analyst Brian Butler.
Waste Management's offer to buy Republic at $34 a share represents about a 22 percent premium to Republic's pre-offer share price.
But it is below Republic's 52-week high of $35 and below Republic's own pre-merger announcement valuation of $34.25 on June 5, said FBR's Butler, who believes Waste Management won't win over Republic's shareholders until it sweetens its bid.