Icahn threatens upset to Dynegy deal

NEW YORK/BANGALORE (BestGrowthStock) – The gloves have come off in the fight for Dynegy Inc (DYN.N: ), as billionaire activist investor Carl Icahn on Tuesday disclosed he has a chunky stake in the power company and was opposing Blackstone’s $4.7 billion buyout deal.

Icahn, who has agitated for change at companies including Yahoo and Genzyme Corp (GENZ.O: ), disclosed he has taken a 9.95 percent stake in Dynegy and does not believe the Blackstone deal is adequate.

New York based-private equity firm Blackstone announced its $4.7 billion, or $4.50-a-share deal to buy Dynegy on August 13, a 62 percent premium over its closing price the previous day.

Dynegy held a “go-shop” period — where rival bidders could have expressed interest — that ended on September 22.

However, despite no other bid materializing, the company’s shares have been trading higher than the offer price, indicating that some expect Blackstone to raise its bid.

Blackstone itself has indicated there was no higher offer coming and cautioned that Dynegy’s future as a public company looked bleak without a deal. (ID: nN06280654: )

The power company also said in a recent letter to shareholders that conditions have deteriorated since Blackstone’s offer, citing low and declining commodity prices, continued economic weakness and a challenging financial position.

Dynegy’s shares were up about 2 percent at $4.85 in early trading on Tuesday.

SHARES ‘UNDERVALUED’

Icahn, who bought 12 million Dynegy shares for $57.5 million, also said Dynegy’s shares were undervalued.

The filing said that Icahn might pursue conversations with Dynegy to discuss the deal.

The previous top shareholder in Dynegy, with a 9.3 percent stake, was hedge fund manager Seneca Capital, which has indicated it could oppose the Blackstone bid, according to a Wall Street Journal article.

In a recent filing Seneca said it reserved the right to “implement plans or proposals with respect to the issuer (Dynegy) as a means of enhancing shareholder value, whether alone or with third parties.”

Blackstone’s deal for Dynegy was unusually structured. It includes a $1.36 billion deal signed at the same time to sell four of Dynegy’s natural gas-fired power plants to NRG Energy Inc (NRG.N: ).

Most of the price of the deal is made up of debt, with $543 million equity.

Shareholder approval requires just over 50 percent in favor to go through and a vote is scheduled for November 17.

Icahn is also involved with Hollywood studios Lions Gate Entertainment (LGF.N: ) and Metro-Goldwyn-Mayer, and has supported a proposal by Lions Gate to combine the two studios.

(Reporting by Megan Davies and Michael Erman in New York and Krishna N. Das in Bangalore, Editing by Ian Geoghegan and Maureen Bavdek)

Icahn threatens upset to Dynegy deal