A Deal Too Far?

Bidders dropping out — for reasons that may or may not include the market meltdown — include Waste Management (Republic), Vishay (International Rectifier), and UTC (Diebold).

The global market meltdown is making it difficult for companies to borrow money to do deals — and is especially encouraging bidders, whether hostile or friendly, to walk away.

Would-be acquirers doubtless have many reasons for backing away these days. Even if the target’s price has fallen since its original offer, financing is far harder, or impossible, to come by. And if they were planning to use cash, bidders may now be finding better uses for it. Or, perhaps, the deteriorating economy is reason enough to decide to take a pass. But for whatever reasons, three large bids now have been withdrawn.

In the largest, Waste Management Inc. cancelled its proposal to acquire all the outstanding shares of Republic Services Inc. for $37 per share, or $6.73 billion. David P. Steiner, CEO of the acquisitive waste hauler, said that given the current state of the financial markets, it would not be prudent to continue to pursue the acquisition. “Our focus will remain where it has always been — on providing strong and stable returns for our investors,” he said.

Waste Management has been trying to buy the number-three company in its industry for the past three months. In fact, it even raised its offer by $3 a share back in August, to $37, to thwart a rival deal between Republic and rival Allied Waste.

“Quite frankly, it came down to the credit markets,” Steiner told the Associated Press. “We’re certainly not willing to pick up assets at any price or if we believe it would create undue risks to our business model.”

Meanwhile, Vishay Intertechnology said it had terminated its $1.7 billion offer to acquire the outstanding shares of International Rectifier for $23 per share in cash. The semiconductor maker, which began its tender offer last month, also said it will be returning tendered shares to their holders.

“We cannot pursue our proposal in the face of opposition from a board of directors that has refused to engage in any discussion with us regarding our offer,” Vishay said in a press release.

International Rectifier responded that its full slate of directors was elected at the company’s annual shareholder meeting last Friday. “International Rectifier’s board and management are pleased with the support and input we received from our shareholders,” said Richard J. Dahl, chairman of International Rectifier.

Also, United Technologies Corp. said it told Diebold Inc. that it had withdrawn the Feb. 29 offer of $2.6 billion that UTC had made for the number-two maker of automated-teller machines. “In light of your extended refusals of UTC’s requests for management discussions and due diligence, we are withdrawing our offer,” said United Technologies Chairman George David in a letter to John N. Lauer, chairman of Diebold. “We had hoped we could negotiate a transaction that would have created substantial value for both your and our shareholders. It’s unfortunate this won’t happen.”

Responded Laurer, in a statement: “The Diebold board of directors remains confident that the company is on the right path, and is encouraged by the continued improvement it has seen in the company’s strategic initiatives to gain cost efficiencies and increase profitability. This gives the board confidence that Diebold is on-course for creating substantial shareholder value for its investors, despite current global financial market conditions.”

Morton Pierce, chairman of law firm Dewey & LeBoeuf’s mergers and acquisitions group, told Reuters that a business slowdown affects the target as well as the acquirer. “Rather than being in an acquisitive mode, people may be more focused on their own business,” he said.

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