Carl Icahn usually makes his headlines by criticizing management for not rewarding shareholders.  This morning he is in the news because he is buying Dynegy Inc. (NYSE:DYN) for a higher price than had been previously agreed to.  An announcement was made this morning that Dynegy’s board of directors has unanimously approved a definitive agreement to be acquired by Icahn Enterprises, L.P. (NYSE: IEP).

Dynegy’s buyout is a tender offer that will follow with a formal merger that pays Dynegy shareholders $5.50 per share in cash.  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.

This is a deal where the plot has thickened and thickened.  The Blackstone Group (NYSE: BX) originally tried to buy Dynegy for $4.50 per share in an August offer and then raised its offer to $5.00 per share.

There is an out here and a go-shop provision: “IEP has also agreed that, in certain circumstances, if a ‘superior’ all cash offer is made and supported by Dynegy, and IEP does not wish to top the ‘superior’ offer, it will support it.”  Dynegy will continue its ongoing open strategic alternatives process where Dynegy will solicit superior proposals until January 24, 2011.

As far as what Icahn will get, the company provides electricity to markets and customers in the United States; as of December 31, 2009, its power generation portfolio consisted of approximately 12,300 megawatts of baseload, intermediate, and peaking power plants fueled by a mix of natural gas, coal, and fuel oil.

The equity value is listed as only $665 million, but Dynegy has approximately $3.95 billion in outstanding debt.

Investors are hoping for a higher deal yet.  Shares are up 4.7% at $5.71 in pre-market trading versus a 52-week range of $2.76 to $10.15.

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JON C. OGG

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