Power plant operator Dynegy (DYN) has agreed to be acquired by Icahn Enterprises (IEP) for $5.50 per share in cash, or approximately $665 million. Dynegy has approximately $3.95 billion of outstanding debt, net of cash.

In November, Dynegy was in talks with the Blackstone Group (BX), which raised an initial offer of $4.50 per share to $5 per share following pressure from shareholders Carl Icahn and hedge fund Seneca Capital. But the raised offer was rejected.

Icahn Enterprises's $5.50 bid represents a 10% premium to Dynegy's average closing stock price over the last 30 trading days. Dynegy closed at $5.45 Tuesday.

The tender offer for all of the outstanding shares of Dynegy that IEP does not already own will commence no later than Dec. 22. IEP and its affiliates own approximately 9.9% of Dynegy's outstanding shares and have previously acquired options to purchase approximately 5% of Dynegy's outstanding shares.

Dynegy can still solicit superior proposals until Jan. 24, which IEP has agreed under certain circumstances to either support or beat. DYN shares traded 3.3% higher at $5.63 in Wednesday premarket action, indicating investors are indeed optimistic about a better offer.

"We believe the IEP offer, coupled with our continued ability to solicit superior proposals and the commitment of IEP to support a company accepted all cash offer for 100% of the company, is a very positive outcome for all Dynegy stockholders," said Chairman, President and CEO of Dynegy Bruce Williamson.

Carl Icahn added that "All stockholders should benefit from the auction process which has now begun at a price which is 10% higher than the last bid."

To complete the transaction, IEP and its affiliates will have to own at least 50% of Dynegy's shares and receive the appropriate regulatory approvals. If no superior proposal is received during the process and the tender offer is successfully completed, Dynegy expects the transaction to close in the first quarter of 2011.


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