Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Things aren't falling into place as easily as they once did for former hedge fund titan Philip Falcone.

Late on Tuesday, Falcone's investment holding company HC2 Holdings decided to make known that it had "repeatedly expressed interest" in a takeover of U.S. grain trader and ethanol producer Andersons. HC2 said it made the disclosure because it hadn't received a substantive response to its all-cash offer of $37 a share, which values Andersons at $1 billion in entirety.

On Wednesday, Andersons countered that it had substantively responded -- and publicly rebuffed the proposal (which it said followed an earlier offer of $35 a share) on the basis that it isn't in the best interests of shareholders and its timing is opportunistic. 

Opening Offer?
HC2's $37 a share offer is significantly below Anderson's recent highs.
Source: Bloomberg

That's certainly true. Although the offer represents a 43 percent premium to Andersons' previous closing price, the company has been in a slump. Earlier this month, it posted a first-quarter loss and acknowledged that weak demand for exports is crippling its grain unit, from which it recently shed non-core assets in Iowa. Its ethanol margins were at or below five-year lows for most of the first three months of this year, in part due to the competition created by below-average gasoline prices (a product of the low price of oil).

Tougher Times
Andersons' margins have been crimped by supply-demand dynamics in its key businesses of grain and ethanol
Source: Bloomberg

Even as Anderson contends with forces that are out of its control, it has planned a two-year program designed to cut $10 million in costs. It's also said a return to "normal" level of profitability is possible after its fall grain harvest. 

For analysts at BB&T Capital Markets, normalized earnings per share are "easily" more than $3 a share -- a far cry from consensus estimates of $0.96 a share this year. They reckon the company could be worth almost $50 a share based on a sum-of-the-parts calculation or $48 a share based on an average price-to-book multiple -- which suggests a meaningful bump is necessary.

Brighter Future
Andersons' EPS is set to tumble to a 10 year low, but then snap back in 2017
Source: Bloomberg

Falcone, who stepped down from Harbinger Capital Partners in 2014 (a year after a settlement with the SEC that involved liquidating his hedge funds and the payment of a $18 million fine), was described by Wall Street peers as stubborn and a "roll-the-dice, put-everything-on-red kind of guy" in this 2011 Vanity Fair profile

But if he -- as chairman, president and CEO of HC2 -- won't budge on price, the very act of making the firm's offer public could backfire, because it could drive Andersons into the arms of an alternate suitor. 

Among those are China's Cofco, Japan's Mitsui, Switzerland's Glencore or Canada's Richardson International, a closely-held grain handler whose CEO named Andersons among potential acquisition targets in an interview 12 months ago

It's notable that in response to Richardsons' overture, Andersons' then-CEO, Mike Anderson, said the company had no interest in selling and that he believed it would remain independent for decades. 

But things change. Pat Bowe, a former Cargill executive, is now at the helm, and the stake held by the founding Anderson family is less than 5 percent. That may make a deal more of a possibility -- if not for HC2, then for another acquirer willing to pony up more money.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Gillian Tan in New York at

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