Allied Waste to Buy Browning-Ferris

Allied Waste Industries Inc., the No. 3 U.S. waste disposal company, said it will buy Browning-Ferris Industries Inc., the second-largest, for $7.3 billion in cash.

Allied Waste will pay $45 for each Browning-Ferris share, a 29% premium over Friday’s close. It also will assume $1.8 billion in debt. Allied’s biggest shareholders, Blackstone Group and Apollo Management, will help finance the buyout.

The combined company, with annual revenue of $6.6 billion, will rank a distant second to Waste Management Inc. of Houston in the U.S. waste disposal industry. Waste Management has grown by making big acquisitions and reducing costs, and that’s put pressure on Allied Waste and Browning-Ferris to do the same, analysts said.

“Browning-Ferris’ results have lagged,” said Melville Cody, an analyst with Sanders Morris Mundy. “When others were busy acquiring, they spent a lot of time buying back shares.”

Browning-Ferris has spent $2.1 billion to buy back shares since October 1997. USA Waste Services Inc. bought Waste Management Inc. in July for $24.9 billion in stock and assumed debt and adopted the Waste Management name. The acquisition has allowed the company to save $800 million a year, Cody said.

Allied Waste shares rose $1.94 to close at $16.94; Browning-Ferris surged $4.13 to $38.88; and Waste Management rose 31 cents to $49.13. All trade on the New York Stock Exchange.

Thomas Van Weelden, Allied Waste’s president and chief executive, said the company will be based in Scottsdale, Ariz., Allied’s headquarters, rather than in Houston, where Browning-Ferris is based. Some job cuts are planned, he said, without providing specific numbers.

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Allied Waste Industries

Third-largest solid waste services company in North America

Annualized revenue: about $1.7 billion

Headquarters: Scottsdale, Ariz.

Employees: 7,500

Browning-Ferris

Second-largest solid waste services company in North America

Annualized revenue: about $4.2 billion

Headquarters: Houston

Employees: 26,000

Source: Reuters