Blackstone’s Bid for Dynegy Too Low, Icahn Says

Blackstone Group LP’s $540 million offer for Dynegy Inc. isn’t adequate, said billionaire investor Carl Icahn, holder of 10 percent of the power producer and who may be its largest shareholder based on filings.

Icahn commented on the proposed purchase in a filing today with the U.S. Securities and Exchange Commission in which he said he controls 12 million shares of Houston-based Dynegy. Dynegy’s shares closed yesterday at $4.75, 25 cents above the Blackstone offer of $4.50 a share.

“I think you will get other shareholders to jump on board with Carl Icahn,” said Andy DeVries, an analyst at CreditSights Inc. in New York. “The biggest question is, what is Carl Icahn holding out for? Is he holding out for $4.75, is he holding out for $5.50?”

Icahn is the chief executive officer of Icahn Enterprises LP, the New York-based holding company for his investment- advisory business, and the world’s 59th richest person, according to Forbes magazine. The market value of Icahn’s energy holdings rose to about $348 million as of June 30 from about $52 million as of March 31, filings show.

Dynegy rose 12 cents, or 2.5 percent, to $4.87 at 4:04 p.m. in composite trading on the New York Stock Exchange. Company spokesman David Byford wouldn’t comment on Icahn’s filing. Tom Johnson, a Blackstone spokesman, declined to comment.

No Competing Bids

Dynegy got no competing bids to the August offer from New York-based Blackstone, the world’s largest private equity firm, which pools money from investors to take over companies. The purchase includes $540 million for the company’s stock and assumption of about $4.16 billion of debt. Dynegy’s board on Oct. 5 recommended shareholders vote for the Blackstone offer at a Nov. 17 meeting.

A handful of investors may now hold 32 percent of Dynegy, based on filings this month by Dynegy, Icahn and others.

Icahn appears to be the largest shareholder with 9.95 percent, followed by entities of New York based Seneca Capital LP with 9.3 percent, Donald Smith & Co with 7.2 percent, and UBS with 6.2 million shares, or a 5.2 percent stake.

Seneca reported its holdings Oct. 7. Dynegy reported the Donald Smith and UBS stakes Oct. 4.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Katarzyna Klimasinska in Houston at kklimasinska@bloomberg.net.

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

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