The extension to 4 p.m. Nov. 23 gives shareholders more time to consider yesterday’s revised offer by Blackstone, which is 50 cents a share higher than its prior bid and includes a $16.3 million breakup fee should they reject the deal, Houston- based Dynegy said today in a statement.
The largest shareholders, billionaire investor Carl Icahn and hedge fund Seneca Capital, reiterated their opposition yesterday after Blackstone raised the offer. Seneca has said Dynegy is worth more than $6 a share now and as much as $18 once a better economy revives prices for power from its plants. Blackstone’s $5-a-share offer values Dynegy at $4.77 million, including debt.
“Obviously, Blackstone didn’t have the votes,” Charles Fishman, a Falls Church, Virginia-based analyst for Pritchard Capital Partners LP, said in an interview today. He rates the shares “neutral” and owns none. “The board now will go back to Blackstone and say, ‘Do you want to increase it again?’”
Dynegy rose 4 cents, less than 1 percent, to $5.06 at 4:01 p.m. in New York Stock Exchange composite trading after touching $5.15.
The shareholder recessed at Dynegy’s headquarters in Houston will resume at 3:30 p.m. Nov. 23, Chief Executive Officer Bruce Williamson said. By recessing the meeting for six days, Dynegy avoids triggering securities rules that call for a longer delay and for a change in the record date for ownership that determines which shareholders can vote.
Christine Anderson, a spokeswoman for Blackstone, the largest private equity firm, had no comment on the delay. Blackstone yesterday called its revised bid its “best and final offer.”
Defeat of the Blackstone takeover would allow other bidders for Dynegy’s assets to emerge, Icahn said yesterday, including potentially his own bid.
Seneca, based in New York, has said Blackstone was scooping up Dynegy on the cheap to profit by selling the plants once the economy revives power demand. Seneca holds a 9.3 percent stake.
Delaying the vote “is a blatant effort to thwart the will of shareholders,” Seneca said today in an e-mailed statement. Shareholders would have rejected the $5 a share offer, Seneca said. Terms of the breakup fee are “virtually unprecedented” and a “violation of fiduciary duty,” the statement said.
Requiring a breakup fee after a higher bid is “perfectly normal” Elizabeth Nowiki, who teaches and researches breakup fees at Tulane Universitys Law School in New Orleans. The higher bid signals other private equity firms that Blackstone considered its first offer a bargain, and the breakup fee insulates it against a bidding war, she said.
Dynegy has predicted its shares will plummet after a rejection of Blackstone’s offer. Dynegy has forecast negative cash flow of $1.6 billion during the next five years to pay debt and keep plants running.
“Dynegy continues to face challenges, many of which are beyond its control, including low and declining commodity prices and continued economic weakness,” Williamson said in a Nov. 8 statement. No higher offers for the company emerged during a monthlong shopping period that ended in September.
Investor-research firms have been divided in their opinion on the Blackstone takeover. Glass Lewis & Co. LLC and Proxy Governance Inc. have advised shareholders to reject the offer, saying Dynegy has better options. Two other advisory firms, Institutional Shareholder Services Inc. and Egan-Jones Ratings Co., supported the deal.
Dynegy, worth almost $19 billion before it tried to swallow Enron Corp. in 2001, closed at an eight-year low of $2.78 a share the day before Blackstone’s original offer was announced on Aug. 13. Interest payments consumed about 12 percent of Dynegy’s third-quarter sales, contributing to its sixth quarterly loss in two years.
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