On Wednesday, grain handler and ethanol maker Andersons Inc. (NASDAQ: ANDE) rejected a buyout offer of $37 a share in cash (a total of about $1 billion) from HC2 Holdings, which is run by Philip Falcone, who formerly led hedge fund Harbinger Capital Partners before he agreed in a 2013 legal settlement to stay out of the hedge fund business.

In a letter to Andersons dated May 17, Falcone said that the company’s non-responsiveness to HC2’s offer it has “left us no choice but to make your shareholders aware of our proposals.”

In its response to HC2, Andersons chairman Mike Anderson said:

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.  Following a thorough review, and in consultation with our independent financial and legal advisors, our Board determined that the offers are not credible, significantly understate the Company’s true value and are not in the best interests of our shareholders.

The drop in crude oil prices between mid-2014 and the beginning of 2016 has made profits from ethanol production a difficult proposition. In its most recent quarterly report, Andersons reported quarterly production of 95 million gallons of ethanol, up from 93.5 million gallons in the prior year’s first quarter, but a pretax loss of $2.7 million compared with a profit of $5.3 million. The company attributed the loss to an inability to hedge production and lock in margins.

In his letter, Falcone said HC2 would pay $950 million for Andersons grain group and rail group and make stalking horse bids for the ethanol group and the nutrient group. The rail car business posted a first-quarter profit of $9.4 million and a full-year 2015 profit of $50.7 million. The grain group posted a loss of $17.4 million in the first quarter and a profit of $13.9 million in 2015. The rail group’s 2014 profit totaled $31.4 million, and the grain group’s profit in that year was $41.0 million.

HC2 also referred to a letter from Jefferies indicating that the brokerage was “highly confident” that it could underwrite the transaction and that HC2 has arranged for up to $680 million in debt financing and an additional $60 million in a revolving credit facility with an affiliate of Cerberus Capital Management.

Andersons stock traded up more than 34% Wednesday morning to $34.50, after closing down more than 2% on Tuesday at $25.94. The stock’s 52-week range is $23.25 to $46.24, and the consensus price target for the shares is $33.67.

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