SCOTTSDALE, Ariz. -- Allied Waste Industries Inc., the No. 3 U.S. waste-disposal company, said yesterday that it will buy Browning-Ferris Industries Inc., the second-largest, for $9.1 billion in cash and assumed debt.
Allied Waste will pay $45 for each Browning-Ferris share, a 29 percent premium on Friday's close, and will assume $1.8 billion in debt. Allied's biggest shareholders, the Blackstone Group and Apollo Management LP, 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 has put pressure on Allied Waste and Browning-Ferris to do the same, analysts said.
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, an analyst said.
Allied Waste said it expects to save $360 million a year because of the purchase, with $290 million of that coming in the first 12 months after the buyout is completed.
Shares of Browning-Ferris surged more than 10 percent Thursday and Friday, as word of the acquisition began to appear on Internet sites where stock rumors are discussed. Allied Waste shares dropped 25 percent Friday.
The Securities and Exchange Commission would not comment on whether it plans to investigate trading ahead of the buyout announcement.
Allied shares rose $1.9375 to close at $16.9375. Browning-Ferris rose $4.125, to $38.875.
Thomas Van Weelden, Allied Waste's president and chief executive officer, said the company will be based in Scottsdale, Allied's headquarters, rather than in Houston, where Browning-Ferris is based. Some job cuts are planned, he said, without providing numbers.
Allied Waste has about 7,500 employees and Browning-Ferris has 26,000, including about 900 at its Houston headquarters.
Pub Date: 3/09/99