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. (Nasdaq: ANDE).
HC2 outlined the $37-a-share bid Tuesday in a statement that also reprinted a letter from Falcone to Andersons Chairman Michael J. Anderson. Herndon, Virginia-based HC2 said in the letter it had expressed an interest in Andersons since January, but the company had rejected its offer as too low. Falcone said HC2 has a "qualified strategic partner" lined up to complete the deal.
Andersons is one of the few remaining independent grain traders left in North America, a region that has been dominated for decades by major players such as Cargill Inc., Archer-Daniels-Midland Co. (NYSE: ADM) and Bunge Ltd. (NYSE: BG). Medium-sized, independent grain handlers like Andersons may be a good fit for the agricultural units of Glencore plc (LON: GLEN)and Chinese group Cofco, which have expressed their desire to fill a gap in their businesses. Cargill announced to sell its crop insurance business to Silveus Insurance Group.
Falcone, HC2’s chief executive officer, said he has also proposed an alternative transaction: acquiring Andersons’ rail unit and part of its grain business for $950 million. In that scenario, HC2 would provide so-called stalking horse bids for each of the remaining assets in a sale process.
"We believe the company has been poorly managed and has not been effective in extracting synergies of any significance from the five disparate corporate entities it owns, controls and operates," Falcone said. "We believe action is necessary to maximize value from these assets."
Maumee, Ohio-based Andersons has posted three straight quarterly losses, the longest stretch in the red since Andersons became publicly traded 20 years ago. The company has also sold off some underperfoming grain assets in Iowa. Andersons spokesmen didn’t immediately respond to messages seeking comment.
The bid is 43 percent higher than Anderson’s closing share price on May 17. The stock changed hands for as much as $34.99 in after-hours trading in New York.