Waste Management Inc. yesterday bid $34 a share in cash to acquire Republic Services Inc., saying its offer to buy the company at a 22 per cent premium is superior to Republic's $6 billion plan to buy it.

In one broad stroke, the potential acquirer has ended up as a possible seller – a situation intentionally created by No.1 waste hauler Waste Management to prevent a formidable rival in a combination of No.2 Allied Waste and No.3 Republic. (See: No 3 US waste hauler Republic to acquire larger rival Allied Waste in $6.24-billion deal)

Waste Management CEO 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.

"Our industry is extremely competitive and capital intensive," Steiner said. As such, he said a deal with Republic would complement Waste Management's assets and allow the combined company to be more streamlined than the companies could be on their own.

Waste Management said its $6.2 billion offer "clearly offers a better and more certain value alternative", being more favorable to Republic's stockholders than the proposed Republic-Allied combination and is "reasonably capable of being completed on a timely basis."

Steiner said that since Waste Management operates in all except one of Republic's 20 markets, cost cutting and operations integration would be easier with a tie-up between them. ''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,'' he said.

Steiner said that Waste Management didn't "go out looking" for the deal, but couldn't ignore the opportunity when Republic Services made its bid for Allied Waste. Waste Management executives also stressed their desire to gain access to Republic's financial information to conduct due diligence.

Responding to the unsolicited offer, Republic Services said it ''will carefully review the proposal received from Waste Management consistent with its fiduciary duties…following its review, the board will respond in due course.''

Waste Management's $34 a share offer is a 22 per cent premium over Republic's Friday closing price. Waste Management shares fell 5.1 per cent in recent trading; Republic jumped 14 per cent to $31.89 and Allied Waste fell 5.2 per cent.

On the other hand, spokesperson from Allied Waste reaffirmed the company's dedication to pursuing its takeover by Republic.

"There's really very little we can say at this point," said James Zeumer, senior vice president of communications. "We continue to believe in the value of the merger between Allied Waste and Republic Services and the ability to generate significant value to shareholders of both companies. We will continue to move down that path."