The second and third largest waste hauliers in the US, Allied Waste Industries, Inc and Republic Services Inc, respectively, today announced that their boards of directors have unanimously approved a definitive merger agreement that firmly establishes one of the leading waste and environmental services providers in the US, with expected pro forma annual revenues of approximately $9 billion and an expected total market capitalisation of approximately $12 billion.

Under the deal Republic Services Inc will acquire its larger rival Allied Waste Industries Inc in a $6.24 billion in share swap deal to create a formidable rival to market leader Waste Management Inc. In 2007, Allied generated revenue of $6.1 billion.

Allied Waste is America's second largest non-hazardous solid waste services company and an environmental leader. Headquartered in Phoenix, AZ, Allied Waste provides waste collection, transfer, recycling and disposal services to millions of residential, commercial and industrial customers in over 100 major markets spanning 38 states and Puerto Rico.

Republic Services, Inc. is a leading provider of environmental services including solid waste collection, transfer and disposal services in the United States. The company's operating units are focused on providing solid waste services for commercial, industrial, municipal and residential customers.

Under the terms of the agreement, Allied shareholders will receive 0.45 shares of Republic common stock for each share of Allied common stock held. Based on the unaffected closing stock prices of both companies on Thursday, 12 June 2008, this represents a premium of approximately 17 per cent over the average closing price of Allied's stock for the previous 30 trading days. In completing the transaction, Republic will issue approximately 198 million shares of common stock to Allied shareholders, representing approximately 52 per cent ownership of the combined company.

Republic expects to put in place a new unsecured senior credit facility and issue new senior notes. The existing senior notes of both Republic and Allied will remain outstanding.

The combined company will have more than 35,000 employees serving more than 13 million customers in 40 states and Puerto Rico. The transaction is expected to close by the fourth quarter of 2008, to generate approximately $150 million in net annual synergies and to be accretive to Republic's earnings per share in the first year following completion of the merger.

The merger will strengthen the national service platform of the companies and integrate the collection, transfer, recycling and disposal (landfill) operations from Republic and Allied under a management team, led by Republic's chairman and chief executive officer, James E. O'Connor. The transaction will also assemble a growing landfill gas-to-energy portfolio and significant untapped renewable energy resources.

The combined company will be diversified across geographic markets, customer segments and service offerings, and will be committed to providing superior customer service. The company expects to generate strong and predictable cash flows from operations in excess of $1.7 billion annually that will be used to invest in the business, fund the dividend program and reduce debt to maintain and improve the company's investment grade credit rating.

''By combining the strengths of two great companies and integrating executives from both teams, Republic will enhance its leadership position in the US environmental services industry, building on both companies' foundations of profitable growth,'' said James E. O'Connor, chairman and chief executive officer of Republic. ''As each company has done individually, the combined company will remain fully committed to serving the needs of our customers, shareholders and employees. The vertically integrated model of the combined company – linking collection, transfer, recycling and disposal services – enhances cash flow, earnings and return on capital for our shareholders, while reducing our risk. Our strategic focus remains on improving return on invested capital, reducing debt and generating higher levels of free cash flow. At the same time, our business model will blend the best practices and complementary assets of the two companies to provide unmatched customer service and operating efficiency. Our employees will benefit from the enhanced career opportunities that result from a larger company better positioned for future success.''

John Zillmer, chairman and chief executive officer of Allied, said, ''Our two companies have known and respected each other for many years, and the time is right for us to take the next logical step in the development of both companies, thus accelerating our ability to achieve our strategic objectives and enhancing our plan for profitable growth. Republic has an extensive presence in the high-growth Sunbelt markets, an established franchise business and a strong capital structure. Allied has a broad national footprint, an innovative procurement platform and significant internalization opportunities. Together, we are positioned for greater success than either company could achieve on its own.''

Following completion of the transaction, James E. O'Connor will become chairman and chief executive officer of the combined company, while president and COO of Allied Don Slager will become president and chief operating officer of the combined firm. Tod Holmes will become chief financial officer.

The board of directors of the combined company will consist of 11 members, including O'Connor, five independent directors from the current Republic board of directors and five independent directors from the current Allied board of directors. The company, which will be based in Phoenix, will be named Republic Services, Inc. and traded under the ticker symbol RSG on The New York Stock Exchange.

The combination of Republic and Allied creates an integrated operations platform that provides significant advantages for serving customers throughout the country. The company will centralize core corporate functions and standardize business practices, creating operating efficiencies and improving productivity, while customer decisions will remain at the local level to ensure the new company remains responsive.

Don Slager, president and COO of Allied, said ''By building on the best practices of both companies, we can further improve productivity and operating margins, while advancing our strategic priorities and investing in the ongoing development of our business and critical people resources. This merger allows us to capitalize on the attractive business opportunities in our industry and enhance our ability to provide comprehensive solutions to the waste-stream management needs of our customers.''

The merger is expected to create significant benefits for shareholders of both companies, and the combined company will have a strong foundation for future financial performance.

Operating Synergies: The companies expect to achieve approximately $150 million in net pretax annual synergies by the third year following the completion of the transaction, primarily from achieving greater operating efficiencies, capturing inherent economies of scale and leveraging corporate and overhead resources.

Attractive Dividend: Republic is expected to continue its current annual dividend of $0.68 per share. This transaction will introduce a dividend benefit to Allied shareholders.

Strong Capital Structure: The companies expect the significant free cash flow and conservative balance sheet resulting from this merger to enable the company to receive an investment-grade rating by the major credit rating agencies. The company intends to use free cash flow to fund its dividend, reduce debt and invest in internal growth. Republic remains committed to maintaining and improving its investment grade credit rating.

The merger is subject to standard closing conditions, including approvals of review process by antitrust and other regulatory authorities, and to the receipt of investment grade ratings as defined in the merger agreement. The companies anticipate that regulatory reviews and approvals can be completed in four to six months.

Merrill Lynch & Co. acted as financial advisor and provided a fairness opinion to Republic. Akerman Senterfitt and DLA Piper US LLP served as legal advisors to Republic. UBS Investment Bank acted as lead financial advisor and provided a fairness opinion to Allied. Mayer Brown LLP served as legal advisor to Allied.