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Grain trader Andersons rebuffs hostile $1bn bid

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US-based agribusiness the Andersons rebuffed a $1bn takeover bid from investment vehicle HC2 Holdings, saying the approach was "not credible" and "significantly" undervalued the group.

HC2 was established by New York financier Philip Falcone, who shot to prominence by founding US hedge fund Harbinger Capital in 2001.

The takeover bid valued the Andersons at the equivalent of $37 per share, representing a 43% premium to the share price as it closed on Tuesday afternoon.

The Andersons is an Ohio-based independent agribusiness company, that focuses on the trading of grains, oilseeds and the production of ethanol.

The Andersons Chairman Mike Anderson said on Wednesday that the proposed takeover price "ignores our value and prospects as a standalone entity and represent an opportunistic attempt to acquire the company at a low point in the cycle".

Synergies

In the HC2 letter to Andersons shareholders, Mr Falcone noted that the business was "poorly managed" and highlighted the failure of "extracting synergies". It is not, however, immediately apparent where Mr Falcone will be able to extract these synergies from.

With no current investments in the agricultural space the Andersons' business model is an interesting target for HC2. HC2 specializes in the leveraged buyouts of smaller whole businesses that provide potentially significant upside for the investment fund.

Its current holdings focus on oil and gas services space, natural gas and steel fabrication, amongst others.

Bidding war?

Given the Andersons' position as one of the last remaining independent mid-tier grain handling and logistics companies in North America, it would be hasty to rule out competing interest from other parties.

Cofco Agri is an international business that has both the balance sheet and the ambition to invest in assets like these. After completing the successful acquisition of Noble's agricultural trading arm late last year the Chinese state-owned entity has shown a willingness to invest abroad. In North America the company notably doesn't own any sizeable trading or logistics assets

A trade buyer would also have the experience and scale to extract those synergies that Mr Falcone was quick to point out.

Certainly, analysts at Stifel forecast that the Andersons refusal would not scupper the bid process.

"While this is likely only the opening bid in what may be a long, protracted process, we think current Andersons shareholders should give serious consideration to the offer given the recent share price performance," the broker said.

But investors left some margin for error.

Andersons' shares stood at $33.71 in morning deals in New York - a rise of 30% on the day, but remaining well short of the offer price.

By Nicholas Burke

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