Blackstone Takeover of Dynegy Opposed by Glass Lewis

Dynegy Inc. shareholders should reject the proposed $540 million takeover by Blackstone Group LP in favor of alternatives such as refinancing or buying back debt to lower costs, proxy research company Glass Lewis & Co. LLC said.

The power producer’s arguments on behalf of the $4.50-a- share deal are “insufficient” and based on a financial analysis that is “too narrow,” San Francisco-based Glass Lewis said in an e-mailed recommendation to clients today. A shareholder vote is scheduled Nov. 17 at Dynegy’s headquarters in Houston.

The takeover is opposed by Dynegy’s largest reported shareholders, Seneca Capital LP, which held a 9.3 percent stake on Nov. 2, and billionaire investor Carl Icahn, whose Icahn Capital LP had 8 percent as of Oct. 8.

Dynegy, the owner of power plants in seven U.S. states, agreed to the Blackstone takeover on Aug. 13. The company searched strategic alternatives for two years before accepting the offer, David Byford, a Dynegy spokesman, said in an e-mailed statement today. Natural-gas prices, the basis for most power prices, have fallen since the takeover agreement, he said.

“The Glass Lewis analysis is flawed in several respects,” Byford said.

Shareholders should reject the analysis done for the Dynegy board by Goldman Sachs Group Inc. and Greenhill & Co. LLC that determined the offer was fair because it’s based on “unreasonable” analysis including failed transactions, Glass Lewis said in its recommendation.

‘Overwhelmingly Trailed’

Based on its own analysis of recent power-sector transactions, the offer is “below average to mediocre,” made after Dynegy shares “overwhelmingly trailed peers” including Calpine Corp., RRI Energy Inc. and NRG Energy Inc., Glass Lewis said.

“All of the points raised by Dynegy are explicitly addressed in our report,” Glass Lewis Managing Director Warren Chen said in an e-mailed message.

Dynegy fell 6 cents, or 1.3 percent, to $4.49 a share at 4:02 p.m. in New York Stock Exchange composite trading. It’s risen 62 percent since the announcement of the Blackstone offer, valued at $4.7 billion including debt.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

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

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