Waste Management / USA Waste Merger

Waste Management Inc., the world’s largest waste corporation has agreed to be acquired by a smaller rival company, USA Waste Services, the 3rd largest waste corporation.

In a stock deal valued at $13.5 billion, USA Waste’s sales of $2.6 billion would more than quadruple, making it twice as big as its nearest rival, Browning-Ferris Industries Corp.

The combined company, which will become the premier trash company in the United States, will be
named Waste Management. ”USA Waste is not a good name for a global company,” quipped Robert
S. Miller, interim chairman of Waste Management who will be the nonexecutive chairman of the new company.

Officially the $20 billion stock-and-debt deal is being billed as a merger. Shareholders of Oak Brook-based Waste Management will own 60 percent of the combined company. But senior management will come from the USA Waste side, and headquarters will be consolidated at that company’s Houston site.

The merger will make Houston the undisputed solid waste capital of the United States, as corporate headquarters of both the No. 1 (Waste Management) and the No. 2 (Browning-Ferris) companies in the industry.

USA Waste also is assuming $7 billion of Waste Management debt as part of the deal.

Waste Management currently accounts for about 15 percent of the U.S. trash hauling business, Drury said, while USA Waste has 5 percent. Company officials said they do not expect antitrust problems since 80 percent of the market would still be open.

HOW BIG?

Rank/Co.                      1997 Revenues Headquarters        Employees Landfills % of trash
                                                                                    hauling business 
                                                                                    controlled
1. Waste Management           $9.2 billion  Oak Brook, Ill.     58,800    137       15%
2. Browning Ferris Industries $5.8 billion  Houston             40,000    100+      10
3. USA Waste Services         $2.6 billion  Houston             17,700    182        5
4. Republic Industries        $1.1 billion  Ft. Lauderdale, Fla. 8,600     43
5. Allied                     $875 million  Scottsdale, Ariz.    5,000     59

Based on current statistics, the combination of USA Waste Services and Waste Management will
result in a company owning 319 landfills, 339 transfer stations and 650 collection businesses, with 76,500 employees worldwide.

KEY FACTS

Waste Management

Headquarters:   Oak Brook, Illinois
Employees:      58,800 worldwide (37,000 in U.S.)
1997 Revenues:  $9.2 billion
1997 earnings:  $1.18 billion loss 
Established:    1971 
Chairman/CEO:   John E. Drury 


USA Waste Services

Headquarters:   Houston, Texas
Employees:      17,700 *
1997 Revenues:  $2.6 billion
1997 earnings:  $267 million 
Established:    1987 
Acting Chairman/CEO: Robert Stevens Miller Jr. 
[* The Washington Post and the Houston Chronicle list their # of employees as 9,800.]

COMBINED ASSETS - NORTH AMERICA

Landfills:
  USA Waste           182
  Waste Management    137
  Total               319

Collection Operations:
  USA Waste           250
  Waste Management    400
  Total               650

Transfer Stations:
  USA Waste           175
  Waste Management    164
  Total               339

One source offers a slightly different breakdown of Waste Management’s assets:

“Waste Management employs 38,400 people and operates 133 solid waste landfills, 7 hazardous waste landfills, 159 transfer stations and 140 materials recovery facilities.”

This states nothing of Waste Managements ownership of companies involved in radioactive waste, medical waste, sewage sludge, waste incineration or pesticides.

Previously, Waste Management owned a partial interest in Wheelabrator. But it is
in the process of acquiring the whole company. And yesterday, Waste
Management officials gave no indication that this merger would jeopardize the
Wheelabrator transaction.

HISTORY / ECONOMIC FAILURE

In a stunning event just about to be lost to history, Waste Management
disclosed two weeks ago that its former executives and its auditors
at Arthur Andersen made repeated mistakes that inflated earnings
reports to investors beginning in 1992. They were also reporting
inflated values for assets including abandoned development projects
and worn-out garbage trucks and dumpsters. The accounting mistakes
and asset write-downs amounted to $ 3.5 billion pretax, or more
than 40% of the pretax profit the company had reported those years.
Also among the mistakes: botching an earlier accounting correction
and keeping for more than a year businesses reported as discontinued.

The restatement and special charges were made by the team of reform
executives who had been recruited by shareholders. As well as
hedge funds operated by George Soros, the latter included Lens,
an investment group that buys into companies with flagging stocks
and poor corporate governance, then incites boardroom purges.
Waste Management shares peaked in 1992 at $ 463/8 and recently
traded at $ 24.

Nell Minow, a principal of Lens, recounts that when Lens first
met with Waste Management co-founder Dean Buntrock in 1995 about
the stock, “he said, ‘The problem is no one believes our numbers.’
” The statement, Minow says, was the essence of denial that his
management was failing.

Waste Management’s accounting wasn’t trusted because the company
regularly took special charges that raised doubts about whether
it was properly recognizing as expenses what it was spending for
new landfills and businesses.

Still, it took two years of pressure from the investors before
key independent directors joined the board, financial officer
James Koenig resigned and Buntrock, who had been chairman and
CEO, gave up his responsibilities. Requests for comment from Koenig
and Buntrock brought no response after being left at Buntrock’s
office and with Waste Management spokesman Bill Plunkett.

Schilit says the restatement by the company isn’t enough: “Somebody
has to be responsible.” Plunkett says staff members of the Securities
and Exchange Commission are collecting information. Private lawsuits
also have been filed. A spokesman for Arthur Andersen offered
a written statement referring questions to Plunkett but offering
no apologies to investors.

Scrutiny for the airplane

Now most of the 1,750 employees in Waste Management’s headquarters
outside Chicago will pay a price for management mistakes. John
Drury, the CEO of USA Waste who will run the combined company
from Houston, says he expects to add only 170 positions to the
130 in his headquarters. Meanwhile, Buntrock was still keeping
an office at Waste Management this week. As he was giving up his
duties last month he bought a corporate airplane from the company
for $ 14 million cash and a complex lease-back agreement. Drury
says he’s been told the terms were fair, “but, obviously, as
we go forward, we’ll be looking into that.”

[USA TODAY, 3/12/98 “Trash hauler’s books yield valuable lesson”]

The merger ends months of speculation about the future of Waste
Management. The company has struggled through four CEOs in the
past year and recently admitted it overstated assets and pre-tax
earnings by $ 3.5 billion since 1992 (Street Talk, below).
The deal caps an aggressive strategy at USA Waste that finds it
taking over a company more than three times its size.

[USA TODAY, 3/12/98 “Waste Management picked up”]

The merger, which the two companies expect to complete next fall, would conclude the humbling saga of Waste Management’s botched drive in the late 1980’s and early 1990’s to become the world’s first global “environmental services” company. That ambition led Waste Management to acquire a range of profit-draining businesses, including hazardous waste management, lawn care, asbestos removal, and Rust International, a large engineering concern. The eventual result was angry shareholders, turmoil in the board room and a disruptive series of management purges and sudden resignations, followed by revelations late last year of accounting irregularities.

[New York Times, 3/12/98 “Waste-Hauling Companies Announce $13 Billion Merger”]

Last year, after pressure from shareholders worried about performance, the company recruited a
new chief executive – Ronald LeMay – from the Sprint telecoms group, only to see him depart within months. Speculation that Mr LeMay had uncovered accounting irregularities spread, and Waste shares tumbled.

[Financial Times (London), 3/12/98 “Top US waste group folded into smaller rival”]

The 1997 loss included $3.54 million in charges as the company refigured depreciation for big-ticket assets such as truck fleets and landfills.

[Chicago Tribune, 3/11/98 “SMALLER FIRM GETS A BIG HAUL; WASTE MANAGEMENT, USA WASTE TO MERGE”]

Four CEOs have led the company since mid-1996 after numerous board shake-ups. The turnover began in May 1996 with the resignation of co-founder Dean Buntrock. Major shareholders demanded changes in what they said was incompetent leadership.

The company rapidly diversified in the 1990s, adding recycling, hazardous-waste management and cleanup, and related businesses. Those ventures proved to be far less profitable than it had hoped.

[Houston Chronicle, 3/12/98 “Corporate cleanup; Deal means changes in Waste-land; New management promises firm will return to basics”]

H. Wayne Huizenga

Fort Lauderdale billionaire H. Wayne Huizenga built his fortune with Waste Management, expanding his one-truck operation into the nation’s largest trash hauler with more than 100 acquisitions.

He sold his interest in the company in 1984 and bought into Blockbuster Video, which he built into the nation’s largest video-store chain before selling it to communications giant Viacom.

Huizenga now oversees Republic Industries Inc., which owns the AutoNation used-car megastore
chain as well as a trash-hauling business. He also owns baseball’s Florida Marlins and hockey’s
Florida Panthers.

[The Tampa Tribune, 3/12/98 “Sale compacts trash industry”]

John E. Drury

Much of USA’s Herculean growth is due to the efforts of John E. Drury, the 53-year-old chairman, chief executive officer – and son of a garbage man.

In early 1997, USA Waste purchased Mid-American Waste Systems Inc., which had operated
Johnson Disposal in the Columbus area. Waste Management also operates in central Ohio.

[The Columbus Dispatch. 3/12/98 “USA PLAYS ITS DUMP TRUMP CARD, HAULS IN RIVAL WASTE MANAGEMENT”]

Simplicity, though, has not stifled growth. USA Waste’s revenues were $434 million in 1994. In a little more than two years, starting in mid-1995, USA Waste made five major acquisitions of garbage haulers, totaling more than $5 billion. Aided by the acquisitions of more than 30 companies last year alone, its revenues reached $2.6 billion, compared with Waste Management’s $9.2 billion.

Drury’s rise to the top of the business has been determined, but not necessarily direct. He served as president and chief operating officer of Browning-Ferris from 1982 to 1991. Drury quit after clashing with then-CEO William Ruckelshaus, who was pushing BFI toward recycling.

Drury spent four years as an investment banker in Houston and joined USA Waste in 1994 as chief
executive officer. He added the title of chairman in 1995.

[Chicago Tribune, 3/12/98 “BUYER HAS KEPT FOCUS, AND THRIVED”]

Mr. Drury first approached Waste Management about merging immediately after Mr. Miller became the company’s acting chairman and chief executive last Oct. 1, Mr. Miller said in a telephone interview today. Mr. Drury was familiar with the company from his long years at Browning-Ferris Industries, a Houston-based company that has been Waste Management’s main rival for most of its existence. Mr. Drury was forced to resign from his job as president of Browning-Ferris in 1990 after disagreeing with William S. Ruckelshaus, then chairman and chief executive, that the company was plunging too heavily into recycling.

After a stint in investment banking, Mr. Drury joined the fledgling USA Waste in 1994 and led it through a series of acquisitions. He made no secret of his ambition to one day be king of the industry.

[The New York Times, 3/12/98 “Waste-Hauling Companies Announce $13 Billion Merger”]

Buying Oak Brook, Ill.-based Waste Management would be the 10th acquisition in four years for
USA Waste.

[San Diego Union-Tribune 3/12/98 “2 giants of waste industry to merge”]

BOARD GAMES

The new company will benefit from a management and corporate governance structure that melds the talents of the two organizations:

John E. Drury, CEO and chairman of USA Waste, will become the CEO of the combined company and chairman of the board’s executive committee.
Rodney R. Proto, USA Waste President and Chief Operating Officer, will retain those titles and also serve as a director.
Earl E. DeFrates, USA Waste’s chief financial officer, will remain as chief financial officer and will also serve as the executive vice president.
Robert S. Miller, Waste Management’s interim chairman and chief executive, will be the non-executive chairman of the board of directors of the combined company.
Additional members of the new senior management team will be drawn from the best of both
companies.
The new company will be governed by a board of directors consisting of an equal number of
members designated by each company’s current board.
Roderick M. Hills, a current member of Waste Management’s board recruited by Miller last year as an outside director of Waste Management, will serve as chairman of the board’s audit committee. Mr. Hills is a former chairman of the U.S. Securities and Exchange Commission.
Jerome B. York, a current member of USA Waste’s board, will serve as chairman of a special
integration committee overseeing achievement of cost savings and synergies. Mr. York is vice
chairman of Tracinda Corporation and a former chief financial officer of IBM Corporation and
Chrysler Corp.
USA Waste President and COO Rod Proto and Waste Management Executive Vice President and
COO Joseph Holsten will serve as co-chairmen of a special management committee designated to
oversee the transition.

BIOGRAPHICAL INFORMATION

John E. Drury

John E. Drury, 53, has been chairman of the board of USA Waste since June 30, 1995 and chief
executive officer and a director of the company since May 27, 1994. Mr. Drury served as a managing director of Sanders Morris Mundy Inc., a Houston-based investment banking firm from 1991 to May 1994.

Mr. Drury served as president and chief operating officer of Browning-Ferris Industries, Inc. from 1982 to 1991, during which time had chief responsibility for all solid waste operations.

Rodney R. Proto

Rodney R. Proto, 49, has been president, chief operating officer and a director of USA Waste since joining the company in August 1996. Prior to joining USA Waste, Mr. Proto was president, chief operating officer and a director of Sanifill, Inc. since February 1992. Previously, Mr. Proto was employed by Browning-Ferris Industries for twelve years where he served, among other positions, as president of Browning-Ferris Industries Europe, Inc. from 1987 through 1991 and chairman of BFI Overseas from 1985 through 1987.

Earl E. DeFrates

Earl E. DeFrates, 54, has been executive vice president and chief financial officer of USA Waste since May 1994. From October 1990 to April 1995, he was also secretary. Mr. DeFrates joined USA Waste as vice president – finance in October 1990 and was elected executive vice president in May 1994. Earlier, Mr. DeFrates was employed by Acadiana Energy Inc. (formerly Tatham Oil & Gas, Inc.), serving in various officer capacities including as the company’s chief financial officer since 1980.

Robert S. (Steve) Miller

Mr. Miller, 56, joined Waste Management in October 1997 as acting chairman and chief executive
officer. He joined the company’s board of directors in May 1997. Most recently he served as acting chief executive officer of Federal Mogul Corporation. Before that he was recruited to serve as chairman of Morrison Knudsen Corporation [NYSE:MK – news] in a critical period of restructuring after the resignation of Chairman and CEO William Agee between April 1995 and September 1996 after which he became vice chairman. He has also been a senior partner at James D. Wolfensohn, Inc., an investment bank specializing in corporate strategy. Mr. Miller’s first major experience with corporate turnarounds was at Chrysler Corporation, where he was a key negotiator of the company’s innovative financial restructuring with the federal government and served as its chief financial officer and vice chairman.

Joseph M. Holsten

Joseph M. Holsten, 45, executive vice president and chief operating officer, joined the company in 1981 and has served in various management positions in Waste Management, Inc.’s North American and international operations. Mr. Holsten is responsible for all operating units of Waste Management, Inc.

Prior to his present position, Mr. Holsten was chief executive of Waste Management International plc and is a member of its board. Prior to working for Waste Management, Mr. Holsten was staff auditor at Coopers & Lybrand in Tucson, Arizona, and senior operational auditor at Talley Industries in Mesa, Arizona.

[Reuters, 3/11/98 “Waste Management and USA Waste Agree to Merge”]

[Waste Management] suffered a revolving door in its executive suite for two years and had launched nationwide searches to find a CEO.

The search eventually led to Wednesday’s announcement of the $ 13.5 billion merger offer from USA Waste, which has the important side benefit of providing the services of Drury, the former Browning-Ferris Industries president and among the waste-hauling industry’s brightest stars.

Drury, after resigning from Houston-based BFI in 1990 and spending four years with the investment banking firm Sanders Morris Mundy in Houston, has taken the industry by storm after he assumed the CEO post at USA Waste in 1994 and set it on a course of growth through acquisitions.

He has focused on buying increasingly larger garbage-hauling firms, and ignored the distractions of higher-cost recycling and hazardous waste businesses.

But before Drury and USA Waste came to lead what experts say could be the industry’s second wave of restructuring, there was Waste Management (not to mention BFI), which had led the first wave.

Founded in 1968 by Dean L. Buntrock and Wayne Huizenga, Waste Management helped revolutionize the mom-and-pop garbage collection business. It became public in 1971 and grew into an international corporation.

Huizenga left in the early 1980s for Florida and has made a name for himself by launching Blockbuster Video (later sold to Viacom), buying the Miami Dolphins and other pro sports teams and creating AutoNation USA.

Buntrock, 66, was CEO from 1968 to mid-1996 and presided over the company as it diversified into other businesses and expanded overseas.

But industry experts said over the years “Waste” – as it’s known within the business – lost its focus and became “convoluted” as it struggled to find ways to continue to grow as a larger and larger multibillion-dollar company.

In 1993, it became WMX Technologies, and diversified into environmental services, hazardous-waste handling and recycling. It created an international subsidiary.

Pete Block, retired vice president of corporate communications at BFI and a consultant in suburban Phoenix, said, “They got themselves so extended and they were also somewhat convoluted.”

Buntrock retired in May 1996 and turned the CEO post over to a handpicked successor, Phil Rooney, a 25-year company veteran. But in February 1997, Rooney was forced out after a clash with shareholders, who were upset by continued falling earnings and weak stock performance.

Last May, shareholders approved changing the company’s name back to Waste Management from WMX Technologies, signifying a “back-to-basics” plan to return to its core business of solid waste collection and disposal and sell $ 2.5 billion in noncore and underperforming assets.

In the meantime, a nationwide search for a CEO turned up Ron LeMay, president of the long-distance telephone company Sprint Corp. But LeMay unexpectedly resigned after only three months.

Buntrock came back on an interim basis, but reportedly was seen as an impediment to attracting a new CEO. In November, he was forced off the board and resigned again in favor of acting CEO Steve Miller, a turnaround expert and former vice chairman of Chrysler Corp.

The company announced a restructuring plan to cut 1,200 jobs, or 3 percent of its North American payroll of 37,700, and condense 250 units into 32.

In February, the company said it would restate earnings in response to the overly aggressive accounting practices employed by Buntrock and “his crony filled board of directors and top management team,” said an editorial published last week in Crain’s Chicago Business, a weekly business newspaper.

“The write-offs followed years in which Waste was used as a toxic playground for a handful of top executives and allegedly independent directors – many of whom had financial ties to the company beyond their board fees,” Crain’s said.

Miller reportedly said when he arrived at Waste it had one of the worst boards in America. Wednesday’s announcement culminates his cleanup of the company.

Some shareholder rights activists see the merger as a big win as shareholders have besieged Waste for two years demanding better performance.

A spokesman with Soros Fund Management in New York, which ranks as one of Waste Management’s largest stockholders with 6.2 percent of its stock and has been one of the company’s biggest critics in recent months, praised the merger and the new management that will come aboard.

“When you go from one of the most incompetent managements I’ve ever encountered to one of the better ones, I think you will be shocked by what happens to the margins,” Stanley Druckenmiller, Soros’ chief investment strategist, told Reuters.

[Houston Chronicle 3/12/98 “Corporate cleanup; Deal means changes in Waste-land; New management promises firm will return to basics”]

Waste Management’s largest shareholder is billionaire George Soros’ money management firm,
which boosted its holdings in December to 22.8 million shares, or 5.01 percent of the total, from 22.6 million, according to Securities and Exchange Commission filings. Soros Fund Management LLC’s Waste Management stake would be worth about $ 575 million, based on Wednesday’s closing price.

[Atlanta Journal and Constitution, 3/12/98 “A joint realm of refuse; USA Waste to buy Waste Management for $ 21 billion”]

CONSOLIDATION / LAYOFFS

Executives say the deal will result in annual savings of at least
$ 800 million through restructuring that could include consolidating
routes, eliminating duplicate facilities and slashing an undisclosed
number of its combined workforce of 76,500. “We might have a
Chainsaw Al approach to Waste Management — slice and dice,”
says James Kelleher at Argus Research, referring to cost-cutting
Sunbeam CEO Al Dunlap.

[USA TODAY, 3/12/98 “Waste Management picked up”]

“There will be some layoffs, no doubt about it,” Drury said. He would not give specifics, although a financial analyst said she understood that 1,800 at Waste Management’s corporate level would get the ax. Oak Brook will become a regional office.

[Houston Chronicle, 3/12/98 “Merger puts waste firm at top of heap; Houston company buys rival in deal involving $ 20.5 billion”]

For employees of Waste, the deal brings a lot of uncertainty, and widespread layoffs are expected. One industry expert noted that Waste Management had a centralized operation with about 1,000 employees in its suburban Chicago headquarters, while USA Waste had a decentralized operation, with not much more than a skeleton crew in downtown Houston.

[Houston Chronicle, 3/12/98 “Corporate cleanup; Deal means changes in Waste-land; New management promises firm will return to basics”]

ECONOMIC FUTURE

But there are dissenters. Robert Friedman, an analyst with S&P Equities in New York, repeated his recommendation for investors to avoid USA Waste stock because of long-term weakness in the
waste management business.

“They (USA) are one of the better managed waste management operations, but my concerns lie
primarily in the unfavorable long-term fundamentals in the waste management business,” said
Friedman, citing an overcapacity of landfills and recent efforts toward recycling and “reducing the amount of waste produced at the source.”

[Chicago Tribune, 3/12/98 “BUYER HAS KEPT FOCUS, AND THRIVED”]

Fears that bad financial news may not be over–or worse, that the SEC could put the company under scrutiny–undoubtedly have hurt efforts to solve the problem of Waste Management’s revolving executive-suite door. Miller is the fourth chief executive in about a year, and he has been adamant that he does not want the job permanently.

[Chicago Tribune, 3/11/98 “SMALLER FIRM GETS A BIG HAUL; WASTE MANAGEMENT, USA WASTE TO MERGE”]

For a start, recycling has been on the rise: this is now estimated to account for about 25 per cent of all municipal waste in the US, a figure forecast to grow to 30 per cent by 2000.

Recycling, however, is a volatile and high-cost business for waste companies, with returns dependent on the price of end-materials, such as waste paper. It also diverts waste materials from dump sites – exacerbating the current surplus of disposal space, and driving down dumping prices.

At the same time, regulation of the industry has intensified. For example, new rules covering landfills – and requiring more stringent liners to prevent seepage – have come into effect over the past five years.

Melissa White, analyst at Piper Jaffray, estimates that “on average, the regulation has increased operating costs by an estimated $5-$10 a ton”.

[Financial Times (London), 3/12/98 “Waste Management gets taken out by USA Waste: One of the most dramatic business stories has come to an end with demise of US group”]

”We’re committed to keeping it very simple, very focused,” Drury said in an interview yesterday on CNN.

[Columbus Dispatch, 3/12/98 “USA PLAYS ITS DUMP TRUMP CARD, HAULS IN RIVAL WASTE MANAGEMENT”]

USA Waste has managed to grow quickly through acquisitions of smaller local carters, much as Waste Management did in the late 1980s, when it transformed America’s highly fragmented garbage-disposal business. But it avoided the ambitious diversification into hazardous waste, environmental clean-up, incineration and engineering that caused huge losses at Waste Management.

[Daily Telegraph, 3/12/98 “Merger puts Waste top of the heap”]

The two companies estimated annual savings of $800 million, a figure
analysts say could be $100 million too low, based on Mr. Drury’s track record in past acquisitions.

[New York Times, 3/12/98 “Waste-Hauling Companies Announce $13 Billion Merger”]

ANTI-TRUST

The new entity will control about 20 percent of the $ 40 billion U.S. market in waste.

Though the merger will bring together the largest and third-largest companies in the waste hauling business, Mr. Miller said that he and Mr. Drury did not expect major antitrust problems. The two companies do have a large share of the market in some regions, including New York and Houston, but barriers to entry are so low that analysts said it would be surprising if regulators demanded that many landfills, disposal contracts or other assets be sold before allowing the merger.

“I get the impression they don’t expect more than $500 million to $700 million of their revenue to be vulnerable,” said Melissa White, who follows the industry for Piper Jaffray in Minneapolis.

[New York Times, 3/12/98 “Waste-Hauling Companies Announce $13 Billion Merger”]

USA Waste Services Inc.’s proposed $ 20 billion purchase of Waste Management Inc. will prompt close Justice Department examination of local garbage-hauling markets that could lead to divestitures in some areas, antitrust experts say.

With the combined company controlling 20 percent of the nation’s trash disposal business, the Justice Department is likely to look closely at what impact the acquisition would have on local markets, experts said.

”What they are going to look at is a series of local markets for picking up commercial trash,” said Donald I. Baker, a Washington lawyer who headed the Justice Department’s antitrust division in President Gerald Ford’s administration. ”So they are going to look at what the alternatives are” in local markets.

The Justice Department has long scrutinized the trash hauling industry because it ”is a traditional area of collusion” by market players bidding for franchises granted by local governments, said Lloyd Constantine, a New York antitrust lawyer who investigated the industry for the New York attorney general in the 1970s.

”Economists predict the higher the market concentration the more likely there is to be collusion,” he said. ”That is not a theoretical issue in the waste hauling industry.”

Robert ”Steve” Miller, chairman and chief executive of Waste Management, said the companies were prepared to make divestitures in the ”few markets (in which) we have high concentrations.”

Last summer, USA Waste Services Inc. agreed to sell a Western Pennsylvania landfill to clear the way for its $ 2.2 billion acquisition of United Waste Systems Inc.

The company agreed to sell a landfill near Pittsburgh to resolve Justice Department concerns that it would control 60 percent of the waste disposal business in Allegheny County. The combination gave the combined company ownership of more than 150 landfills and 270 garbage collection companies.

The courts, however, have ruled that even a big local market share does not necessarily translate into anti-competitive market power.

The Justice Department failed in 1984 to stop Waste Management’s acquisition of a rival trash business in the Dallas area even though the combination gave it a 48.8 percent share of the local market.

The 2nd U.S. Circuit Court of Appeals held that the local garbage business was so easy to enter that the acquisition didn’t give Waste Management the power to dominate the Dallas market.

Since then, the Justice Department has shifted its focus from trash routes to landfills when studying barriers to entry, said Charles F. Rule, a former assistant attorney general for antitrust who worked on the 1984 case.

”If you have somebody in a particular market who has control over a landfill, then it becomes very difficult for a new entrant to come in because of the difficulty of getting new landfills” approved by local governments.

[Pittsburgh Post-Gazette, 3/13/98 “U.S. DELVING INTO TRASH OPERATIONS”]

Citing an analyst’s research note on the deal this morning, the second arbitrager said states where the companies’ operations are dually concentrated include Pennsylvania, New York, California, Virginia and Florida.

[Reuters, 3/12/98 “Waste Mgmt, USA Waste to be scrutinized”]