July 14 (Bloomberg) -- Waste Management Inc., North America's largest trash hauler, made an unsolicited offer to buy Republic Services Inc. for about $6.19 billion, seeking to stop the company from acquiring Allied Waste Industries Inc.

The bid of $34 a share in cash is 22 percent higher than Republic's closing share price on July 11, Houston-based Waste Management said today in a statement. Waste Management fell $2.12, or 5.8 percent, to $34.49 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest daily drop since Oct. 26.

Waste Management Chief Executive Officer David Steiner is trying to maintain the company's size advantage in an industry affected by rising fuel costs and a weakening economy that has reduced demand for construction-waste removal. The trash hauler and its rivals have cut unprofitable routes and added fuel surcharges to stay competitive.

Waste Management would likely borrow to pay for Republic, ``adding considerable debt to the capital structure versus where they are today,'' Fitch analyst Stephen Brown said today in a telephone interview. ``Equity investors are looking at the overall cost and having some concern about that.''

Republic agreed last month to buy Phoenix-based Allied Waste in a $6.1 billion stock transaction that would make it North America's second-largest trash hauler by revenue. Standard & Poor's analyst Stewart Scharf estimated in a June 23 interview that Republic would have about 17 percent of the national market after acquiring Allied, still smaller than Waste Management's 25 percent.

Relative Values

Waste Management's offer is about 6.3 times Republic's 2009 estimated ebitda of $989 million, the average estimate of six analysts surveyed by Bloomberg. That compares with Republic's bid of 3.3 times Allied's estimated ebitda of $1.84 billion, the average estimate of eight analysts.

Waste Management operates in all except one of Republic's 20 markets, which are mostly in the southern U.S., making it easier to integrate operations and cut overlapping administrative costs, Steiner said in an interview.

``This is a series of 20 deals in 20 of our market areas, and so the local management is able to get those synergies out very easily,'' Steiner said.

Combining with Fort Lauderdale, Florida-based Republic may save about $150 million in duplicate costs within a year, Waste Management said today in the statement.

Waste Management's acquisition of Republic would create a company that would have had sales of $16.5 billion last year, compared with $9.24 billion for a Republic-Allied merger, according to Bloomberg data.

Cash Available

Waste Management ``has the cash and available financing to complete the deal without too much trouble,'' Scharf said in a telephone interview today. ``Republic's purchase of Allied would require more difficult arrangements.''

Steiner said his company consulted antitrust advisers before announcing its offer and wants to reach an agreement with Republic management to ensure regulatory approval.

``I'm not going to say whether there will be a higher bid,'' Steiner said when asked what his company would do if Republic rejects today's offer. ``This is not a deal that we feel we have to have at any price.''

Republic ``will carefully review the proposal received from Waste Management consistent with its fiduciary duties,'' the company said in a statement. ``Following its review, the board will respond in due course.''

Republic rose $3.86, or 14 percent, to $31.76 in New York composite trading. Allied Waste fell 20 cents, or 1.7 percent, to $11.79.

Lower Revenue

James O'Connor, Republic's chief executive officer and chairman, said in April that cost cuts and an average price increase of about 4 percent in the first quarter helped compensate for lower revenue from construction sites amid the U.S. housing downturn.

Housing construction starts in the U.S. fell to 978,000 in May, down 36 percent on the year, according to data from the National Association of Home Builders.

O'Connor assumed his role as chairman from Wayne Huizenga, who co-founded Waste Management with Dean Buntrock in 1971. Huizenga retired from Republic in September 2002.

To contact the reporter on this story: Rob Delaney in Toronto at robdelaney@bloomberg.net.

Last Updated: July 14, 2008 16:24 EDT