Icahn, Seneca Threaten Blackstone Bid For Power Co.

Oct 12 2010 | 1:07pm ET

A pair of hedge funds have thrown a monkey-wrench into the Blackstone Group's $4.7 billion buyout of power company Dynegy.

Carl Icahn's Icahn Enterprises has acquired a 10% stake in Dynegy and announced his opposition to the Blackstone deal. In a filing with the Securities and Exchange Commission, Icahn said it believed Houston-based Dynegy's "shares were undervalued" and that it does not "believe that the consideration agreed in the proposed merger is adequate."

Blackstone has offered $4.50 per share; Dynegy shares are currently trading above that. The private equity giant has said it will not offer more for the company.

Meanwhile, hedge fund Seneca Capital has taken a 9.3% stake in Dynegy. While Seneca has not announced its outright opposition to the Blackstone deal, it did say that it has "contemplated and reserve[s] the right to implement plans or proposals with respect to the issuer as a means of enhancing shareholder value, whether alone or with third parties."

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