Will HC2 Holdings Inc. (NYSEMKT: HCHC) sweeten its buyout offer for Andersons (ANDE)


HC2 Holdings Inc (NYSEMKT: HCHC)’s offer to buy out Andersons Inc. (NASDAQ: ANDE) for about $1.04 billion was recently rejected. But the reason for the rejection makes you feel that HC2 could eventually succeed in bringing the grain handler under its armpit. The board of Andersons said that the $37 per share buyout price that HC2 was offering them undervalued the company. Would that cause HC2 to boost its takeover offer?

Following the rejection of its $37 per share bid for Andersons, HC2 Holdings Inc. (NYSEMKT: HCHC) can either back out or sweeten its offer. But the decision to go public over the offer for Andersons indicates a strong interest on the side of HC2 to buy the asset. With that, you get the feeling that backing down isn’t an option. However, a bid war for Andersons could also ensue, potentially forcing HC2 to improve its offer if it doesn’t want to be outdone.

HC2 Holdings Inc. (NYSEMKT: HCHC) buying all of part of Andersons

In its letter to the board of Andersons, HC2 Holdings Inc. (NYSEMKT: HCHC) outlined intent to acquire all or part of the company. If it is taking over part of the company, HC2 would spend $950 million to acquire part of Andersons’ grain business and all of its rail business.

HC2 Holdings Inc (NYSEMKT: HCHC) made two bid for Andersons before going public over the latest one. In an earlier bid, HC2 offered to acquire Andersons for $35 a share and in the latest case its offer stood at $37 a share.

What did Andersons say?

According to Andersons’ chairman, Mike Anderson, HC2’ buyout offer ignores the value of the company. It appears to Anderson that HC2 is trying to underpay for the company by making an unworthy bid during a low point in the industry cycle.

HC2 Holdings Inc (NYSEMKT:HCHC)’s offer reflects a premium 43% on the stock of Anderson a day before the bid was made public. But the offer pales in comparison with Anderson’s peak price of $70 attained in late 2014.

Who else might show interest for Andersons?

Chinese company Cofco Corp and Richardson International are cited as potential rival bidders for Andersons. Both have shown great interest in buying smaller food companies and Cofco has in particular turned $3 billion to acquisition of promising food traders in the recent times.


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