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US grain handler Andersons rejects $1 billion all-cash bid by HC2 Holdings

U.S. grain handler Andersons on Wednesday rejected a $1 billion all-cash offer from HC2 Holdings, a company run by former hedge fund manager Philip Falcone.

The Andersons' board of directors said it determined that HC2 proposal undervalues the company and are not in the best interests of its shareholders.

"We believe 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," Chairman Mike Anderson said in a statement.

Former hedge fund manager Phil Falcone
Steve Marcus | Reuters
Former hedge fund manager Phil Falcone

HC2's offer of $37 per share represents a 42 percent premium to Andersons' closing price on Tuesday. HC2, a diversified holding company, said it would also assume $402 million of Andersons' debt.

Andersons' shares were up 26 percent at $32.74 in extended trading, while HC2's shares were little changed. Andersons' stock price is down 45 percent over the past year.

Analysts have long considered the company, which has a market value of about $748 million, to be a prime takeover target in the farm sector because of its medium size and diversified assets, including grain storage facilities and rail cars.

HC2 has repeatedly expressed interest in a "negotiated transaction" to Andersons' board since January, HC2 said in a letter to the agribusiness.

At a meeting last month, Andersons said HC2's offer was too low without giving any "indication of an acceptable price or a justification for a higher price," according to the letter.

Andersons has been "poorly managed," HC2 said, citing weak earnings and a $100 million budget for a new corporate headquarters.

Bowe, 57, became Andersons' CEO and president in November after a career at global commodities trader Cargill.

Under the previous CEO, Andersons began building a new 138,000 square-foot headquarters near its current home base in Maumee, Ohio, which it leases.

Jim Burmeister, treasurer of Andersons, declined to reveal the cost of the new headquarters to Reuters on Monday.

HC2, which holds a stake in Andersons, said as an alternative to acquiring the entire company it was willing to buy the company's grain and rail businesses for $950 million. In addition, it would also make stalking horse bids for each of the company's remaining assets, HC2 said.

A "stalking horse" bid is used as a starting bid or minimally accepted offer that other interested bidders must surpass if they want to buy the company.

CNBC contributed to this report.