Icahn And Seneca Sink Dynegy Bid

Carl Icahn and Seneca Capital have outplayed Blackstone in its bid for the energy company Dynegy.

Dynegy announced Tuesday morning that it does not expect shareholders to approve its merger agreement with Blackstone Group, and plans to immediately seek alternative proposals from other parties and review its restructuring alternatives.

In a stunning press release issued Tuesday morning, the power company said it anticipates that the recently revised $5 per share proposal “will not receive the necessary votes to be adopted” at the Special Meeting of Stockholders, which is scheduled to resume Tuesday at 3:30 pm central time.

“As part of the open strategic alternatives process, Dynegy’s financial advisors will contact a broad group of potential strategic and financial buyers, including Seneca Capital and Icahn Associates,” it said in a statement, referring to the two hedge funds that have aggressively opposed the deal. “Dynegy invites other interested third parties to contact Dynegy or its financial advisors.”

In a separate announcement Tuesday morning, Dynegy said it has instituted a poison pill designed to prevent unfriendly investors from acquiring more than 10 percent of the stock and those who already have exceeded that threshold—Carl Icahn specifically, though not identified—from buying more.

“The Board of Directors adopted this short term, narrowly tailored Rights Plan to prevent any person from obtaining control or de facto control of Dynegy without offering a control premium to all Dynegy stockholders,” the company said in its announcement. “The issuance of the Rights is not intended to prevent a sale of control of the company that is determined by the Board of


Directors to be fair, advisable and in the best interests of all Dynegy stockholders.”

The plan expires following Dynegy’s next annual meeting, which hasn’t been announced.

Dynegy said a Special Committee of independent directors will oversee the process of seeking new alternatives. It also said it would discuss with Seneca adding an additional outside independent director to its Board and to the Special Committee. There are currently six individuals on Dynegy’s Board, five of whom are independent.

Dynegy also said the Special Committee will evaluate the company’s forecasts and current commodity and financial market conditions as well as Dynegy’s strategic alternatives. It said an independent financial restructuring advisor will review strategic alternatives to create stockholder value, including management’s previous analysis of individual asset sales, debt restructuring and cost cutting opportunities.

“We are committed to moving Dynegy forward and, because we believe stockholders will not approve the transaction with Blackstone, the Board will initiate an open strategic alternatives process to maximize stockholder value,” said, Bruce A. Williamson, Chairman, President and Chief Executive Officer of Dynegy Inc.