Philip Falcone's HC2 Makes $1 Billion Offer for Andersons
May 17 2016 - 6:20PM
Dow Jones News
Former hedge-fund manager Philip Falcone's HC2 Holdings Inc. has
made a bid to buy agricultural company Andersons Inc. for about $1
billion in cash.
The offer values shares in Andersons at $37 a piece, according
to a letter viewed by The Wall Street Journal, a 43% premium over
Tuesday's closing price but well below the near $70 peak the stock
hit in late 2014.
Shares of Andersons rose 21% to $31.40 in after-hours trading
following the Journal's report of the bid.
In his letter Tuesday to Andersons Chairman Michael Anderson,
Mr. Falcone said that HC2 "has repeatedly expressed its interest"
in Andersons to enter into a negotiated transaction. "Yet neither
you nor anyone at the company had substantively responded to our
$37 all-cash offer." Mr. Falcone stated that while Andersons
assured "a meaningful exchange of information" at a meeting on
April 18, it has "only stated that the price was too low without
providing any indication of an acceptable price or justification
for a higher price."
"Unfortunately, you have left us no choice but to make your
shareholders aware of our proposals," the letter said.
A representative for Andersons didn't immediately respond to a
request for comment.
Mr. Falcone, who formerly led Harbinger Capital Partners, shot
from relative obscurity to become one of the investing stars of the
financial crisis with lucrative bets against subprime mortgages.
But the firm started to suffer deep losses and regulatory issues
emerged, and in 2013 Mr. Falcone admitted wrongdoing as part of a
civil settlement with securities regulators and agreed to a
five-year ban from the securities industry.
Since stepping down from the holding company behind Harbinger,
Mr. Falcone has been running a smaller public holding
company—HC2—that invests in growth-oriented businesses. The firm,
which has lost about two-thirds of its value over the past 12
months, counts steel fabricator Schuff Steel, game publisher
Dusenberry Martin Racing and energy company American Natural Gas
among its holdings.
In the letter Tuesday, Mr. Falcone called Andersons "poorly
managed" and ineffective in "extracting synergies." He said HC2 is
interested in acquiring all of Andersons, though he also expressed
interest in alternatively buying two of the company's five
entities—its grain business, which is its largest, and its rail
segment. Under that scenario, HC2 would provide "stalking horse
bids," designed to set a floor for potential bids, for the
remaining assets.
Andersons, based in Maumee, Ohio, specializes in the grain,
ethanol, plant-nutrient and rail sectors. In its most recent
quarter, the company posted a loss of $14.7 million, down from a
year-earlier profit of $4.1 million. Chief Executive Pat Bowe
pointed to unfavorable conditions in the grain market, in addition
to lower shipments to China. Mr. Bowe said earlier this month that
performance would be "challenged until the fall harvest, which
should produce opportunities to return to normal levels of
profitability."
Mr. Falcone is also known for having founded wireless venture
LightSquared, which filed for bankruptcy in 2012 after the Federal
Communications Commission rejected its plans to launch a wireless
network. Last year, a bankruptcy judge approved LightSquared's
restructuring plan, ending a battle with Dish Network Corp.'s
Chairman Charlie Ergen.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
May 17, 2016 18:05 ET (22:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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