For the second time, The Andersons has turned down a buyout offer from HC2, an investment holding company. The Andersons, a grain merchant and handler based in Ohio, initially turned down a $37 per share proposal.
HC2 has also proposed 2 alternative plans:
Buy out the company’s grain group, which would include the rail operations, for $950 million. HC2 floated that idea in mid May, which the board of directors of The Andersons also turned down.
Splitting off that part of The Andersons “would result in even lower value for shareholders than your proposal for the whole Company,” said Michael J. Anderson, chairman of The Andersons’ board in a letter to HC2. “Valuations of similar businesses in recent transactions are at multiples well in excess of what you are proposing.”
That alternative asset sale also “would impose significant tax inefficiencies and debt breakage costs that further impair value to shareholders and render your proposal untenable.”
An additional offer of $200 million to buy the company’s ethanol operations for $200 million, which Anderson wrote was “far below the trading values of comparable businesses. Hiving off the Ethanol business, along with Grain and Rail, exacerbates the tax inefficiencies of an asset sale and would leave shareholders with considerably less value from a sale of the parts than they would receive from your (original) $37.00 per share proposal for the entire Company.”
Anderson stated that “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.”
The Andersons’ board and management “remain confident in our ability to execute on our standalone plan and believe we are well positioned to continue to create significant long-term value for shareholders,” Anderson added.
Anderson said that the board remains willing “to engage constructively with you or any other party should circumstances warrant so doing.”
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If HC2 came back with a revised plan “that has the legitimate possibility of delivering higher value to shareholders,” The Andersons would enter into negotiations, provided HC2 signed a none-disclosure agreement.
So far, though, all of HC2’s offers “continues to significantly undervalue the Company and, having been made at an opportunistic time in the overall agribusiness cycle, fails to reflect the Company’s prospects as a standalone entity” and none of the proposals are in the best interests of shareholders and are “not a basis for further discussion.”