For Carl Icahn, the enemy of his enemy has become an enemy of his own.
Seneca Capital blasted Icahn Enterprise’s $665 million deal to acquire Dynegy Inc., just weeks after the two hedge funds joined forces to sink the Blackstone Group’s proposed acquisition of the power company.
Employing the time-tested activist technique of all-caps, New York-based Seneca called its erstwhile ally’s offer the “WRONG PRICE at the WRONG TIME for the WRONG REASONS.”
“Facing the likely removal of the CEO-chairman and one other director from the board in the coming weeks, the Board enticed Dynegy's largest shareholder with a virtual ‘give away’ of the company and a $16 million break-fee (nearly $0.90 per share of its holdings) in return for IEP and its affiliates' agreement to vote in favor of a cash transaction from a subsequent bidder and, vitally important to management, to vote against Seneca Capital's consent solicitation,” Seneca said. “In a panic, sparing no tactic to secure a change-of-control and thereby to trigger lucrative severance arrangements, Dynegy short-circuited the customary buyer diligence process by providing for post-signing diligence in the proposed merger agreement.”
Seneca said that Dynegy is worth between $6 and $7 per share; Icahn, which owns 9.9% of the company, is offering $5.50. Seneca owns 9.3% of Dynegy.
Seneca may have a tough battle ahead of it against its fellow hedge fund: Some 37% of shareholders voted for the lower Blackstone bid last month, meaning Icahn can prevail if he convinces another 3% or 4% of shareholders to back him.