Trash haulers Allied Waste and Republic in talks to merge

Allied Waste Industries Inc. and Republic Services Inc., the second- and third-largest U.S. trash haulers by sales, are in talks to merge in a proposed transaction worth $6.59 billion.

Allied Waste shareholders would receive 0.45 shares of Republic Services common stock for each Allied Waste share, the companies said Friday.

The combination would create a larger rival to Houston-based Waste Management Inc., the biggest trash hauler by sales. All three companies have spent more than a year dropping less-profitable customers and raising prices amid higher fuel costs and a decline in U.S. home building, which has undercut demand for debris removal. The strategy helped all three companies report higher earnings for 2007 and the first quarter of 2008.

Shares of Phoenix-based Allied rose $1.08 to $15. Shares of Fort Lauderdale, Fla.-based Republic rose 19 cents to $33.85.