Wonder what has been going on over at Dynegy since the company announced last week that its second effort to sell itself had collapsed and the US power producer’s top management was leaving?
My guess is that a lot of soul-searching has shareholders wishing they had accepted at least one of the buyout proposals they had been offered over the past few months. The company’s share price has been trending down since that second deal unravelled. And now Standard & Poor’s, the ratings agency, has cut its ratings on Dynegy. Here is what analyst Swami Venkataraman had to say:
The fight over Dynegy is not over yet. Despite joining forces to block the Blackstone group’s takeover of the US power producer late last year, Carl Icahn, the largest holder of Dynegy shares, and Seneca Capital, the second largest owner of Dynegy shares, have since parted ways.
Mr Icahn has made his own bid for Dynegy, and Seneca believes it undervalues Dynegy – the same argument Mr Icahn and Seneca made to convince shareholders to block the Blackstone takeover.
While Mr Icahn seeks shareholder support for his bid, Seneca is proposing that shareholders replace two board members and repeal bylaws blocking takeovers that do not have board approval.
Dynegy has cancelled its deal to sell out to Blackstone, after the proposed $4.7bn deal failed to get enough shareholder support.
Sheila McNulty has the news from Houston:
The group also said it would solicit alternative proposals and review its standalone restructuring alternatives, in a statement issued early on Tuesday before voting was due to close later in the day on the Blackstone buy-out.
Dynegy said it would contact a broad group of potential buyers, including its two largest investors, the hedge fund Seneca Capital and activist investor Carl Icahn, after they had both rejected the Blackstone deal as inadequate. It invited other interested parties to contact the company or its advisers.
But will Icahn or Seneca be forthcoming? I’ll leave you to read Sheila’s previous posts on this:
- Icahn and Seneca have spooked Dynegy’s shareholders
- Where were Icahn and Seneca when Dynegy was looking for a buyer?
Dynegy’s decision to delay for a week the close of voting on its buyout by Blackstone indicates not quite enough shareholders are on board. If they were, the votes would have been tallied on Wednesday, as planned, and the deal completed.
Dynegy says it had to give shareholders more time because Blackstone revised its offer price late on Tuesday, and they needed more time to consider the new offer. But in this world of instant information, anyone involved would have had ample time to learn of the new $5.00 a share offer, up from $4.50, with plenty of time to change their vote.
Today is D-day. D standing for Dynegy. Yes, at long last the deal that has had the power sector at the edge of its seat for months will be settled one way or the other.
Blackstone increased its bid at the last minute – Tuesday evening – to $5 a share, from $4.50 a share. That is an 11.1 per cent increase over its initial bid and valued Dynegy’s equity at about $603m.
Not bad for a company that has been in a perpetual state of restructuring since the Enron era, when energy companies up and down Houston’s Louisiana Street found themselves in trouble.
The battle for Dynegy’s future is getting more intense by the day.
Dynegy’s chief executive, Bruce Williamson, and the board are urging shareholders to accept a proposal to sell the independent power producer to the Blackstone Group for $4.7bn. They say they have tried for years to find a buyer for the company, which faces a bleak future given low and dropping US natural gas prices and a heavy debt load it has been selling assets for years to service. Blackstone has the deep pockets to take the company off the restructuring wheel and put it on stable ground.
On Thursday, two separate proxy research firms gave opposing recommendations to shareholders. Egan-Jones Ratings said the company’s financial position meant it would be risky for Dynegy to remain a standalone company. But Glass Lewis said it would oppose the deal because it was insufficient and based on too narrow an interpretation of the company’s finances. They are not the first to weigh in.