In a stinging letter yesterday, garbage hauler Republic Services Inc. rejected an unsolicited $6.19 billion cash offer from larger rival Waste Management Inc., saying the proposal "seriously undervalues" its company.

Republic, the nation's third-largest waste collector, instead wants to stick with its own deal, announced last month, to buy No. 2 Allied Waste Industries Inc. That all-stock agreement was worth about $6 billion at the time.

All three companies operate in the Philadelphia area.

"Republic is not for sale," James O'Connor, the company's chairman and chief executive officer, wrote to David Steiner, chief executive of Waste Management, which is headquartered in Houston.

The investment office that manages the assets of the Bill & Melinda Gates Foundation Trust also disagreed with the Waste Management deal. The foundation owns 15.6 percent of Republic and 2.3 percent of Waste Management.

The investment office also said it thinks the deal undervalues the target company and lacks strategic rationale, and believes the regulatory process would be arduous and risky.

Also, it said Republic's shareholders would be best served by the proposed purchase of Allied.

Republic's O'Connor said that the company's board was aware of its fiduciary duties, and that Republic remains off the market because of its prior agreement to buy Allied.

Waste Management's offer of $34 a share, announced Monday, represented a 22 percent premium to Republic's closing stock price of $27.90 on July 11.

But as Republic's shares have climbed on the news this week, that premium has shrunk to 5 percent, based on the company's closing price yesterday of $32.44.

"In your press commentary, you referred to the Waste Management proposal as 'opportunistic,' " O'Connor wrote in his letter. "We believe that your proposal is opportunistic for you and that it will deny Republic stockholders the opportunity provided by the merger between Republic and Allied." Republic is based in Fort Lauderdale, Fla.

Waste Management said in a statement that it was mulling its next step, hinting it might sweeten the deal.

"We are disappointed in the Republic Board of Directors' unwillingness to consider Waste Management's proposal," the company said, adding its offer "could reasonably be expected to lead to a superior proposal," it said.

Brian Butler, an analyst at FBR Capital Markets, said Republic's rejection of the buyout offer was expected.

"I think Waste Management knew it was not going to happen at $34," he said.

The choice for Republic will come down to money, Butler said.

"I felt that Waste Management can get the deal done in the $38-40 range," he said. "Anything less than $37, you go with Allied Republic," he said.

Butler said Waste Management may want to buy Republic because, as it said, it could save $150 million a year in boosting its size and to improve its ownership of assets such as landfills.

Another possible reason is to block the Allied-Republic merger, Butler said.

"If you want to be more cynical, it keeps a near competitor from being created," he said.

O'Connor said Waste Management's proposal would not prompt Republic officials to change their strategy "and we are concerned that it may be an effort by our largest competitor to disrupt our plans."

As of June 20, the value of Republic's acquisition of Allied was $6.07 billion, based on its offer of 0.45 worth of Republic share for each Allied share held.

Outstanding shares of Allied totaled 432.5 million as of April 24.

Today, that deal is worth about $6.32 billion.

Allied said in a statement that the Waste Management proposal "does not constitute, and could not reasonably be expected to lead to, a transaction that is more favorable to Republic stockholders" than the agreement with Allied.