Andersons seeks liquidity for its shares

3-for-2 split also intended to attract the interest of small, retail investors

12/21/2013

The Blade/Lisa Dutton
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In an unexpected early Christmas gift, The Andersons Inc. on Thursday surprised its investors by declaring a split of its common stock.

On Feb. 18, shareholders of record as of Jan. 21 will be awarded one extra share of stock in the Maumee agribusiness for every two they now hold.

The three-for-two stock split is expected to boost the company’s current 18.8 million shares of stock now outstanding to about 28.2 million.

Nick Conrad, The Andersons’ treasurer, in reaffirming a statement from company Chairman and CEO Mike Anderson, said the company’s key motivation for the stock split was to put more liquidity — the ease with which a stock can be bought or sold without greatly affecting its price — back into The Andersons’ stock.

But the company also wanted to make the stock more accessible to smaller, private (or retail) investors.

The split accomplishes both, Mr. Conrad said.

“It will help facilitate interest from our retail investors,” Mr. Conrad said. “The institutional investor doesn’t care about liquidity. They’re more interested in stock price.”

But the company treasurer said the agribusiness doesn’t place one type of investor over the other and tries to meet the needs of both. “We really try every day to be stewards of this company, which means we can’t lose track of our commitment,” he said.

“Making the shares a little more liquid, making more shares out there, in theory, means the bid asked [for those selling shares on the Nasdaq] should narrow a little bit,” he said.

The 52-week range of The Andersons’ stock, which is traded on the Nasdaq under the ticker symbol “ANDE,” had gone from a low of $42.16 last Dec. 31 to $90.56 on Dec. 9. On Friday it closed up $1.31 at $87.78 a share.

Thanks to a number of key acquisitions and ever-positive quarterly performances, including several record-breaking ones over the last few years, the company’s stock has been on a steady rise in 2013.

When the stock split occurs in February, it’s a certainty the price will decline, although Mr. Conrad would not speculate where it might land.

“The price adjusts accordingly,” he said.

“The impact of these things is measurable in the first 80 to 90 days after the split,” he said.

In 2006 when The Andersons announced its last split, a two-for-one stock split, its shares went from $82.65 on June 28 to $41.51 on June 29.

A month earlier, on May 3, 2006, the stock had gone as high as $122 a share, which was a prime motivator for the company to split its stock seven years ago.

Equity analyst Farha Aslam of Stephens Inc. was bullish on the stock split announced Thursday.

“The Andersons shares have posted strong gains in the past 6 months, reflecting the good 2013 harvest and excellent profits in ethanol,” Ms. Aslam wrote in a report she issued after the split was announced.

“The action was taken to enhance liquidity, which we view positively given the limited amount of shares outstanding,” Ms. Aslam stated.

A University of Toledo finance professor, who asked not to be named because of a lack of familiarity with The Andersons, said liquidity is one of several primary reasons a company would split its stock.

“You want to make the stock price more reachable. Once it goes to about $100, if you think about it, not many people would actually put up $100 for one share,” the professor said. “I use the example of Berkshire-Hathaway in my classes. It goes for about $115 and [Chairman Warren Buffett] never does a stock split. The number of shares stays the same.

“But [Mr. Buffett’s] thinking is simple. He’s saying, ‘I’m fine if the small investors can’t buy my stock,’ ” the professor said.

Mr. Conrad said The Andersons had been thinking of doing a stock split “for a while” but market forces prevented the company from doing so earlier this year.