Updated: The Andersons rejects offer

by Javier Blas and Simon Casey

U.S. grain trader The Andersons Inc. rejected an unsolicited $1.04 billion takeover offer from HC2 Holdings Inc., the holding company run by former hedge fund manager Philip Falcone.

The Andersons said in a statement Wednesday that its board of directors rejected two offers from HC2 at $35 and $37 per share in cash, made in late January and late March respectively. Andersons shares rose 32% to $34.82 at 10:59 a.m. in New York.

HC2 Holdings Inc., the investment company run by former hedge fund manager Philip Falcone, made an unsolicited $1.04 billion takeover offer for U.S. grain merchant and ethanol producer The Andersons Inc. (Photo: larryhw/Thinkstock)

HC2 disclosed its most recent offer late Tuesday. In a letter to Andersons’ board, Falcone, HC2’s chief executive officer, said his company has a "qualified strategic partner" lined up to complete the deal. He also outlined an alternative proposal in which HC2 would acquire Andersons’ rail unit and part of its grain business for $950 million.

"We believe HC2’s proposals ignore our value and prospects as a standalone entity and represent an opportunistic attempt to acquire the company at a low point in the industry cycle," Andersons Chairman Mike Anderson said in the statement.

The approach from HC2 could now open a bidding war as Andersons is one of the few remaining independent U.S. grain traders, and several larger traders are trying to expand in the key American farm market. Grain handler Richardson International Ltd. said in November it’s interested in buying U.S. grain-trading assets. Andersons could also interest Cofco Corp., the Chinese group that over the last two years has spent nearly $3 billion buying smaller food traders.

"It is our view that the $37 offer is an opening shot and that HC2 is likely willing to increase its offer price," Heather L. Jones, an analyst at BB&T Capital Markets who has a buy rating on the stock, said in a note. "The fact that other companies, such as Canada-based Richardsons, have expressed an interest in The Andersons gives us further confidence that the offer price will likely move higher."

Other potential bidders could include Glencore Plc, Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co, said Farha Aslam, an analyst at Stephens Inc. Glencore, which in April agreed to sell a 40 percent stake in its agriculture unit to a Canadian pension fund for $2.5 billion, is also looking to expand in the U.S. grain sector, but the commodity trader could regard Andersons as too small a target.

Maumee, Ohio-based Andersons has posted three straight quarterly losses, the longest stretch in the red since it became publicly traded 20 years ago. Pat Bowe, formerly an executive at Cargill, took over in November as the first CEO to come from outside the Andersons’ eponymous founding family.

Andersons’ financial adviser is Deutsche Bank AG and its legal adviser is Kirkland & Ellis LLP. Herndon, Virginia-based HC2 is working with Credit Suisse Group AG and Jefferies Group LLC as financial advisers and Latham & Watkins LLP as legal adviser.

To contact the reporters on this story:

Javier Blas in London at [email protected]

Simon Casey in New York at [email protected]

To contact the editors responsible for this story:

Simon Casey at [email protected]

Will Kennedy at [email protected]

Robin Saponar

© 2016 Bloomberg L.P