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.
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.