(New throughout, adds details, background, link to factbox)
By Tom Polansek
May 18 (Reuters) - Loss-making U.S. grain handler Andersons
Inc ANDE.O on Wednesday rejected a $1 billion takeover offer
from HC2 Holdings Inc HCHC.A as too low, calling the bid an
attempt to capitalize on a sharp downturn in the agricultural
economy.
With the U.S. farm sector drowning in supplies that have
depressed crop prices, the Ohio-based agribusiness said it was
better off remaining a "standalone entity" than selling to the
holding company run by former hedge fund manager Philip Falcone.
HC2's takeover offers "represent an opportunistic attempt to
acquire the company at a low point in the industry cycle,"
Chairman Mike Anderson said in a statement. HC2 had no immediate
response.
Grain companies, including larger rivals Archer Daniels
Midland Co ADM.N and Bunge Ltd BG.N , have suffered as the
global glut has hurt U.S. exports and encouraged farmers to keep
their harvests in storage, rather than selling them to
merchants.
Andersons, which buys grain, produces ethanol and leases
rail cars, swung to a net loss in 2015 and in the first quarter
of 2016. Before HC2's bid became public, Andersons' stock price
was down nearly 45 percent over the past two years.
Shares were up 26.3 percent at $32.75 in afternoon trading
and rose as high as $35.29, shy of HC2's latest offer of $37 a
share. HC2 shares rose 1.5 percent to $4.05.
Mike Anderson, grandson of the grain company's founder,
denied HC2's claim that it had not substantively responded to
the offer. In January, HC2 offered $35, according to his
statement.
"The offers are not credible, significantly understate the
company's true value and are not in the best interests of our
shareholders," he said.
If Falcone's persistence pays off, he would acquire a
company that has grown to control the eighth largest U.S.
network of commercial grain elevators by capacity since its
start about 70 years ago. Andersons also runs the eighth-largest
privately owned fleet of rail cars.
The value of such strategic assets should increase when
overseas demand for U.S. crops recovers.
Some agricultural companies, which are more traditional
bidders for farm assets, are interested in deals, too.
Last month, Chinese state-owned trader COFCO said it was in
talks over potential partnerships or acquisitions in North
America as it works to increase export capacity.
In the most recent agricultural deal, commodity trader
Glencore PLC GLEN.L sold a 40 percent stake in its
agribusiness to Canadian pension fund CPPIB for $2.5 billion.
Last year, Richardson International, one of Canada's largest
grain handlers, said it was interested in Andersons as part of a
push to expand in the United States.
Andersons handles crops and owns rail cars that serve the
export market, although its business is mainly domestic.
HC2 said on Tuesday it would assume $402 million of the
company's debt as part of its takeover offer.
The holding company also said it was willing to buy the
company's grain and rail businesses for $950 million as an
alternative. HC2 said it would make stalking horse bids for each
of Andersons' remaining assets.
A "stalking horse" bid is an opening offer that other
interested bidders must surpass if they want to buy the company.
Last fall, Andersons hired a new chief executive and
president, Patrick Bowe, from global trader Cargill Inc
CARG.UL . On Monday, he told Reuters the company was not
looking to be acquired and that its diversified operations were
an asset.
"I like growth," Bowe said in an interview. "That's been in
my DNA."
Deutsche Bank (DE:DBKGn) is acting as a financial advisor for Andersons
and Kirkland & Ellis is acting as a legal advisor. Credit Suisse (SIX:CSGN)
is HC2's financial advisor and Jefferies is its legal advisor.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FACTBOX-Andersons: handling grains, trains, ethanol and
fertilizers
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>