Icahn 'Confused' By Hedge Fund's Opposition To Dynegy Deal

Feb 7 2011 | 1:02pm ET

With his bid to buy energy company Dynegy Inc. floundering and Dynegy's stock price creeping above his offer price, Carl Icahn moved to defend his offer for the company.

Icahn's hedge fund has offered $665 million for Dynegy in what the company says is the only offer on the table. But another hedge fund, Seneca Capital, which worked with Icahn last year to sink the Blackstone Group's $600 million bid for the company, said it is worth at least $1 per share more than Icahn is offering, and investors haven't rushed to tender their shares. In fact, as of the deal's first tender offer deadline last month, only 4.4% of shares had been tendered, leading Icahn to extend the offer until Wednesday.

Icahn is offering $5.50 per share. Dynegy stock is currently trading about $6.

Still, Icahn said Friday that falling natural gas prices make that valuation illusory.

"It doesn't take a great analyst to figure out that this is a negative, not a positive," Icahn said. "Therefore, I'm confused that Seneca believes Dynegy is worth between $7.50 and $8.50, since it was trading at only $2⅞ in August."

But whatever Dynegy is actually worth, Icahn himself admits he's surprised his own bid hasn't been trumped.

"We made a stalking horse bid," he explained. "I believed that higher bids would materialize and apparently Seneca did also. No other bids materialized."


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