Billionaire Buys On, While Opposing Bid Of Rival for TakeoverBillionaire Bill Gates has been steadily increasing his stake in Republic Services Inc. even as he opposes a takeover bid from Waste Management Inc.
The Microsoft Corp. co-founder, through investment vehicle Cascade Investment LLC, has bought more than 5.7 million Republic Services shares since the beginning of August, bringing his total stake to 32.9 million shares, or about 18.1% of the shares outstanding. Mr. Gates bought the shares for an average price of $34.11 each. In 4 p.m. New York Stock Exchange composite trading, Republic Services shares were down $1.28, or 3.9%, to $31.48.
Mr. Gates's purchases come amid a merger triangle involving Republic, the nation's third-largest waste-services company by revenue, and the two largest trash haulers, No. 1 Waste Management and No. 2 Allied Waste Industries Inc. In June, Republic Services agreed to buy Allied Waste for $6.24 billion in a so-called merger of equals. The next month, Waste Management stepped in with a $34-a-share unsolicited bid for Republic Services, which it raised to $37 a share in August after Republic rebuffed the first offer.
Cascade Investment and the Bill & Melinda Gates Foundation Trust are also shareholders in Waste Management, together holding 2.3% of the company. In July, the investment office that manages the assets of Cascade and the Gates Foundation Trust sent Waste Management a letter voicing their support for the Republic Services-Allied Waste deal and asking Waste Management to abandon its proposal.
"I think it's a win-win for [Cascade] under either scenario," said Brian Butler, research analyst with FBR Capital Markets Corp.
Mr. Butler said Cascade is happy with Republic Services' management team, and would be pleased with its running a combined Republic-Allied business, as the merger agreement provides. "They want to be there for the very long term and adding to their portfolio, long term, it's a win if Allied and Republic merge," he said.
Mr. Butler said that he doesn't expect the Waste Management bid to succeed and that he thinks Cascade and septic tank cleaner companies are raising its Republic Services stake to help vote through the merger with Allied Waste. A Cascade representative didn't return a call seeking comment.
When Republic Services adopted a so-called poison-pill plan in July to thwart the Waste Management bid, it allowed Cascade and the Bill & Melinda Gates Foundation Trust a waiver to increase their combined stake to 20% from 15%.
According to Ben Silverman, research director at InsiderScore.com, which tracks and rates insider-stock transactions, Cascade's recent purchases of Republic Services signal more than just their support for the company's deal with Allied Waste. "I think they truly believe the better deal is for Republic to buy Allied Waste, and for that combined company to then compete directly with Waste Management," Mr. Silverman said. "However, if it doesn't go through, they still believe Republic is a strong company."
Mr. Silverman also cited the investment approach of Michael Larson, who manages the Gates funds, as playing a role in the recent purchases. "Larson takes a very value-focused approach. They believe the stock is, even at these levels, undervalued," Mr. Silverman said.
By: Yogita Patel
