Disposable income: Republic in $6 billion deal

WEST PALM BEACH, Fla. -- Disposal company Republic Services said Monday it will buy Allied Waste Industries in a $6.07 billion stock deal that would combine the second- and third-largest players in the industry.

Republic Services employs 1,500 workers in Southern Nevada. It provides trash collection for Clark County and the cities of Las Vegas, North Las Vegas and Henderson, said Bob Coyle, president of area operations.

Republic Services will pay Allied Waste shareholders 0.45 worth of a Republic share for each share held, valued at $14.04 per share based on Republic's Friday closing stock price of $31.19.

Based on the nearly 432.5 million Allied shares outstanding on April 24, the deal represents a nearly 4 percent premium to Allied's closing stock price Friday.

Shareholders of Phoenix-based Allied Waste will own 52 percent of the combined company, which will be led by Republic Chairman and Chief Executive James O'Connor. Allied's Don Slager will become president and chief operating officer.

The new company will be called Republic Services, with headquarters in Phoenix.

About 100 of the 170 employees working in Republic's Fort Lauderdale, Fla., headquarters will likely lose their jobs because of overlap, O'Connor said Monday on a conference call.

Company officials said the number of additional layoffs had not been determined.

Analysts with JP Morgan said there was potential for both companies if the deal goes through. It would allow Republic to "broaden its footprint" while providing Allied access to the high-growth markets in Nevada and Florida.

The companies announced June 14 that they were in merger talks, valued then at about $15.23 per share, or $6.59 billion. The news sent shares of both firms down about 5 percent and the stocks have since slipped further.

In a statement Monday, Republic Services said the combined company will have annual revenue of about $9 billion and a market capitalization of about $12 billion. More than 35,000 employees will serve over 13 million customers in 40 states and Puerto Rico.

The deal is expected to close by the fourth quarter and add to Republic's earnings per share in the first year after closing.

"The combination of the Republic and Allied businesses would create a more formidable competitor in the solid waste business and is a logical step in industry consolidation," Moody's Investors Service analyst Jonathan Root said in a statement.

Moody's said Monday it was reviewing the ratings of Republic and Allied.

Moody's placed its "Baa1" senior unsecured rating of Republic Services on review for possible downgrade. A "Baa1" rating is an investment-grade rating. Moody's also placed the "B1" corporate family rating of Allied Waste on review for possible upgrade. A rating of "B1" is considered noninvestment grade, or "junk" status.

Shares of Allied dipped 2 percent, or 27 cents, to $13.29, while Republic fell 21 cents to $30.98.

The company's board will consist of 11 members, including O'Connor, five independent directors from the current Republic board and five from Allied's board. The new stock will be traded under the ticker symbol 'RSG', Republic's current ticker.

The combined company creates the nation's second-largest waste disposal and garbage hauler behind Houston-based Waste Management, which had revenues of about $13.3 billion last year, according to the company's Web site.