Waste Management hoping to haul Republic-Allied Waste antitrust approval into 2009, analyst says

By Paul A. Harris

St. Louis, July 29 - Shares of Republic Services, Inc. (NYSE: RSG) were essentially flat in Tuesday trading, up 0.09%, or 3 cents, to close at $32.08.

That closing price is just 5.65% below Waste Management, Inc.'s $34 per share bid for Republic Services - a bid that Republic, which is in the market, itself, to acquire Allied Waste Industries, Inc., has rejected.

A special situations equities analyst told Prospect News on Tuesday that there is an expectation in the market that Waste Management will raise its bid for Republic Services.

And in doing so, the analyst said, Waste Management may in part be playing for time.

A longer haul

The analyst said that in order to understand the situation it is useful to review the pecking order among the top three waste haulers: Waste Management is the biggest, Republic Services is number two and Allied Waste is number three.

In late June, when Republic Services bid 0.45 of a share of its stock for one share of Allied Waste stock, Waste Management's number one position came under threat of being overtaken by the entity that such a merger would create.

Hence, the analyst recounted, a week ago Waste Management made the bid for Republic Services.

The analyst said that regardless of whether it succeeds in acquiring Republic Services, Waste Management will benefit by stretching the timeline for antitrust regulatory approval for either transaction into 2009 because it will forestall the potential merger of Republic Services and Allied Waste into a time period when regulatory headwinds are expected to intensify.

If number one, Waste Management, cannot acquire number two, Republic Services, Waste Management would prefer to derail or at least forestall the two-three merger between Republic Services and Allied Waste, the source asserted.

"If Waste Management is not serious about acquiring Republic then it benefits by a prolonged antitrust review of the deal in which it is not involved, between Republic and Allied Waste, because if it extends into 2009 it will come under the purview of a new U.S. presidential administration, with some new staff at the Department of Justice, which is reviewing this deal," the analyst said.

"Even if 99% of the old staff is retained, new staff is likely to start over."

The analyst added that if a Democratic administration succeeds in taking the fall presidential election there is the perception that, since Democrats are traditionally stricter on mergers, the Republic Services-Allied Waste deal could potentially be blocked.

"Republic Services has already received a second request from the Department of Justice, meaning the department didn't clear the deal [with Allied Waste] the first time it looked, and intends to make a closer examination of antitrust issues," the analyst said.

Meanwhile on Tuesday, shares of Waste Management (NYSE: WMI) gained 2.42%, or $0.85, to close at $35.92.

Allied Waste (NYSE: AW) finished the session 2.09%, or $0.24, higher at $11.71.

Jerry, Carl and Boone

In Sunnyvale, Calif. the clock is ticking toward the Friday meeting of Yahoo! Inc. shareholders, when the company's CEO, Jerry Yang, is expected to welcome to the Yahoo! board corporate raider Carl Icahn and two other members of Icahn's slate.

Sources who spoke to Prospect News on Tuesday expect that little of interest will materialize at that meeting.

What a couple of those sources do expect is a certain amount of disgruntlement among Yahoo! shareholders.

A stock analyst who covers Yahoo!, and who agreed to speak Tuesday on background, said that the disgruntlement may have been foreshadowed by Boone Pickens telling the San Francisco Chronicle he is selling 10 million shares in the company at a loss.

This source also said that weakness in the internet ad business, and uncertainty regarding the impact that a prolonged economic slowdown could have on it, won't likely improve shareholders' moods at the Friday meeting (although the sector is still growing, the source added).

The analyst also recounted that Capital Research & Management, the second-largest holder of Yahoo! shares, is expected to withhold its votes for Yang and Yahoo! chairman Roy Bostock as a protest against how the company handled the merger bid from Microsoft Corp.

However the source added that such a move on the part of Capital Research would be largely symbolic.

Microhoo revisited

On Tuesday Prospect News quizzed three market sources, two of whom declined to go on the record, as to the likelihood that Yahoo! and Microsoft will in some way revisit one or more merger scenarios in the wake of the Friday meeting.

The stock analyst who covers Yahoo! said that a lot will depend upon Carl Icahn's approach to serving on the board.

"There is a chance that something will happen," the analyst said.

"Icahn represents a minority, but will probably be a very vocal minority, and could be very disruptive to the company.

"Who knows, maybe he will get a couple of the current board members on his side."

Meanwhile in a Tuesday email Sachin Shah, special situations analyst for ICAP Securities, wrote that he does not expect anything interesting to happen at the Friday shareholders meeting, but does expect a resolution to the Yahoo!-Microsoft situation shortly after. Shah is preparing a note to investors regarding that situation.

The only nay-sayer among the trio of market sources came from another special situations analyst who spoke on background.

This source said that the revisiting of any form of Yahoo-Microsoft relationship is highly unlikely so long as Jerry Yang remains at the helm of Yahoo!

Shares of Yahoo! (Nasdaq: YHOO) closed 3 cents, or 0.10%, higher on Tuesday at $20.15 (as to what caliber of wailing and gnashing of teeth such a share price might give rise to at the Friday shareholders meeting, the Tuesday close is slightly less than 39% lower than the revised $33 per share bid for Yahoo! which Microsoft submitted just before withdrawing completely, in May).

Shares of Microsoft (Nasdaq: MSFT), meanwhile, gained 2.39%, or $0.61 per share, on Tuesday, to close at $26.11.

Elsewhere shares of Google Inc. (Nasdaq: GOOG) ended the day 1.13% higher at $482.50.

Tuesday's situations unfolded as the major U.S. stock indexes rallied smartly.

The Nasdaq gained 2.45%, or 55.4 points, and closed at 2,319.62.

The Dow Jones Industrial Average ended the day up 2.39%, or 266.48 points, at 11,397.56.

The S&P 500 rose 2.33%, or 28.82 points, and finished at 1,263.19.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.