Overwhelming 'yes' for Waste Management merger

Shareholders have voted overwhelmingly to merge Waste Management with Australia's Transpacific Industries, despite concerns about the deal's structure being voiced right down to the wire.

A ballot returned 97.3 per cent support for the deal yesterday that, because of its amalgamation structure, required only 75 per cent approval. Since the proposal was announced in March, it has attracted criticism for being a takeover in disguise.

Before the vote, chairman Jim Syme told a packed annual meeting in Auckland that the $8.642 a share offer was a significant premium which had the board's unanimous support.

Fisher Funds chief investment officer Warren Couillault said he would reluctantly vote in favour of the deal, although not before he detailed his concerns to the board.

Couillault had three concerns which covered just about every angle - the deal's structure, the price and the role of board.

"Control of the company and unfettered access to its cashflow can change hands and indeed the company can disappear if just a small number of shareholders vote in favour," Couillault said. "That's got to be disturbing to all shareholders."

He appreciated the strategic rationale but said the cash-only offer shut shareholders out from enjoying any ongoing benefits from the merger.

"Quite simply a takeover in our view would have been fairer, cleaner and equally as fast as this amalgamation structure, if the deal terms are as good as some people are saying."

The merger benefits were not fully reflected in the offer price and Fisher Funds could not contemplate continued involvement in the company, which had sidelined its potential expansion in Australia.

"It's Fisher Funds view that boards have mandates to run companies, boards have mandates to expand companies but they don't have mandates to sell companies," Couillault said.

Syme responded that Couillault's criticisms were not based on fact.

"Our job is to do the best for the shareholders and if that involves selling a company, so be it," Syme said.

That would also involve the Waste Management board losing their jobs.

"I think we are part of the synergy benefits of this move," he said. "So we will be retiring, gone and that's it."

The offer of $8.642 a share was higher than comparable transaction multiples within the waste industry globally and was significantly higher than an independently assessed value range, Syme said.

If the deal had been structured under the Takeovers Code, which would have required 90 per cent support, the business could have become operationally frozen in a protracted process.

Chief executive Kim Ellis said Waste Management had been up to $300 million short of being able to buy Australian solid waste business Cleanaway.

Ellis said: "We just were a mile away, so we had no major transaction presenting itself to us with our competitors to get us critical mass [in Australia], Cleanaway was a lost cause and we had an offer from Transpacific sitting on the table."

A timetable for completion of the merger and the payment of a special fully imputed dividend of 54c a share will be drawn up once regulatory approval has been received.

Transpacific executive chairman Terry Peabody was delighted with the approval.

"We look forward to welcoming Waste Management's employees," Peabody said.

The merger

Proposal is announced on March 27.

Transpacific offers $8.642 a share.

Grant Samuel appraises offer as fair on April 28.

Shareholders accept the offer on May 17.

Transpacific will buy the company for $870 million.