Icahn Scrambles For Support In Dynegy Buyout

Jan 28 2011 | 11:28am ET

Seneca Capital may be right in thinking that energy company Dynegy is worth more than anyone seems willing to pay for it.

Investors tendered just 4.42% of the company's outstanding shares in response to Icahn Enterprises' $665 million offer for the company by this week's deadline. So Icahn has extended the deadline to Feb. 9.

The hedge fund needs more than 50% of shares to be tendered to move forward with its takeover of Dynegy, which has the support of the Houston-based company's management.

It certainly won't be getting that support from Seneca, Dynegy's second-largest shareholder after Icahn. As if to underscore its opposition to Icahn's deal, Seneca said this week that it wouldn’t support a buyer at $6 per share, even though Dynegy said this week that no one had offered to top Icahn's offer of $5.50 per share.

Seneca believes Dynegy to be worth at least $6.50 per share.

The hedge fund may have eyes on the company itself, but Dynegy blocked one potential route this week by denying it a waiver to buy more than 10% of its shares. Without that waiver, if Seneca and its allies top that figure, it would trigger Dynegy's poison pill.

Granting the waiver would allow Seneca "to acquire control of Dynegy without paying a control premium to all stockholders," Patricia Hammick, who heads Dynegy's takeover commission, wrote to Seneca.

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