Carl IcahnMichael Nagle
Billionaire investor Carl Icahn said he would vote against Blackstone Group's proposal to buy Dynegy Inc. and would offer a $2-billion (U.S.) line of credit to the struggling power company.
Mr. Icahn and hedge fund Seneca Capital, Dynegy's two largest shareholders, believe Blackstone's $543-million bid for the company is too low, threatening the deal. Seneca has argued that the company would have more value on its own, but Dynegy has said it could face dire financial problems.
"The Icahn companies, which have billions of dollars of liquidity, will today contact management to make available a $2-billion line of credit if Dynegy management cannot obtain other financing," Mr. Icahn said in a regulatory filing.
He also said he had acquired call options that would allow him to raise his stake in Dynegy to 12.9 per cent. In October, he held nearly 10 per cent.
Dynegy shares rose 12 cents to $4.75 in late morning trading on the New York Stock Exchange.
The loan offer comes after Dynegy warned it would face severe financial hardship if shareholders voted down the $4.50-a-share takeover offer from private equity firm Blackstone. The deal, worth $4.7-billion including debt, must win shareholder approval at a meeting scheduled for Nov. 17.
Mr. Icahn voiced opposition to the Blackstone deal in October but had been quiet since. Meanwhile, Seneca has launched a campaign against the Blackstone deal and plans to nominate two directors to Dynegy's board. Seneca owns a 9.29 per cent stake in Dynegy.
The power company has defended its deal, saying that market conditions have deteriorated since Blackstone's offer due to low and declining commodity prices, continued economic weakness and its challenging financial position.
"The risks of continuing to operate as a stand-alone public company significantly outweigh the potential upside of doing so," the power company has said, forecasting $1.6-billion of negative cash flow between 2011 and 2015.
It has also said that absent the deal, it would be forced to seek financing alternatives.
Proxy advisory firm ISS has recommended that shareholders vote in favor of the takeover by Blackstone.
Dynegy and Blackstone could not be immediately reached for comment on Friday.