Dynegy says proxy group favors deal

By Michael Erman and Matt Daily

NEW YORK (BestGrowthStock) – Power company Dynegy Inc (DYN.N: ) said proxy advisory firm ISS recommended that shareholders vote for the company’s takeover by private equity firm Blackstone Group LP (BX.N: ), despite objections by two of the company’s largest shareholders.

Blackstone agreed to buy Dynegy in August for $543 million, or $4.7 billion including debt, but the deal must win shareholder approval at a meeting scheduled for November 17.

Hedge fund Seneca Capital and billionaire investor Carl Icahn, each owning nearly 10 percent of Dynegy’s shares, have argued that Blackstone is paying too little.

ISS, which is owned by RiskMetrics Group, said it believes the $4.50-a-share offer represents a fair price. ISS is the most prominent of the firms that advise institutional investors how to vote in deals and proxy contests.

In its recommendation, ISS said it was a “near-impossibility” that Dynegy would attract a higher offer. It put the company’s value without any deal on the table at $2.66 a share.

After the Blackstone deal was announced in August, Dynegy’s shares traded well above the bid value, reaching as high as $5.15 in early September.

But the shares have since retreated, indicating that the market is optimistic the deal will be approved. Shares rose 3 cents to $4.47 in late afternoon trading on Monday.

The Blackstone bid is structured unusually. It includes a $1.36 billion deal by Blackstone to sell four of Dynegy’s natural gas-fired power plants to NRG Energy Inc (NRG.N: ).

Dynegy has argued that should shareholders vote down its deal with Blackstone, the company would face severe financial hardships. It says market conditions have deteriorated since Blackstone’s offer due to low and declining commodity prices, continued economic weakness and a challenging financial position.

Dynegy also reported its net loss in the third quarter fell to $24 million, or 20 cents per share, from a loss of $212 million, or $1.26 per share, in the year-ago quarter.

Revenue rose 15 percent to $775 million.

(Additional reporting by Megan Davies; Editing by Gerald E. McCormick, Dave Zimmerman and Steve Orlofsky)

Dynegy says proxy group favors deal