Reluctant support for Waste Management merger

Support for plans to merge Waste Management with Australia's Transpacific Industries is growing despite disquiet amongst fund managers about the structure of the deal.

Rebecca Thomas, ING chief investment officer, said the fund would reluctantly accept Transpacific's $8.64 a share offer at the May 17 shareholder meeting "because we really are in a situation where the whole of the deal structure has effectively put us in a position where we almost have no choice".

Fisher Funds Management, previously a critic of the proposal, said on Monday it would accept the offer.

But it was accepting because it no longer fully supported Waste Management's board and key executives, and concluded that long-term growth had been compromised by Waste Management's dropping out of bidding for Australian solid waste company Cleanaway, which Transpacific is trying to buy.

Thomas said Waste Management had adopted a short-term attitude, "either as a result of their career aspirations or because of their feeling that they couldn't effectively compete with other Australian bidders for assets that were coming up for sale".

Andrew South, principal at Brook Asset Management, said the fund was still looking at its options but since Fisher Funds had come out in support of the deal "it makes it harder for other minorities".

South had some sympathy for Fisher Funds concerns "in the fact that they [Waste Management] closed off alternative bidders and other options for the company and circumvented the takeovers rules by heading towards the amalgamation proposal".

Under the amalgamation structure, Waste Management needs only 75 per cent shareholder approval, as opposed to the 90 per cent support it would have needed under the Takeovers Code.

The issue of whether the proposal is a merger or merely a disguised takeover has been a key talking point.

Guy Elliffe, head of equities at AMP Capital Investors, would have preferred a takeover approach. "I think it's a more transparent ... representation of what was actually going on."

Despite this he said AMP would support the deal.

Paul Richardson, BT Funds Management executive, would have preferred shares in Transpacific to the purely cash offer.

"Cash is not much use [because] I have to reinvest into stock anyway."

But the price being offered was good relative to history, he said, and although a final decision was yet to be made BT was tending towards supporting the deal.

* Waste Management said yesterday it was giving shareholders advance notice of points to be discussed at the May 17 meeting.

"We would, for example, be concerned if any shareholder voted against the amalgamation on the basis of comment in the media that doing so will secure a better offer," said chairman Jim Syme.

The proposal enabled "shareholders to make up their minds based on the transparent value of the business today, not on any anticipated level of benefit which Transpacific may or may not receive".


THE PROPOSAL

* Waste Management has agreed to merge with Transpacific Industries.

* Shareholders are being offered $8.64 a share.

* Fisher Funds stockholding is 6.2 per cent.

* ING stockholding is 5.5 per cent.

* Plan needs 75 per cent approval.