Dynegy price is ‘full and fair’ – Blackstone Group

Private equity firm Blackstone Group will not increase its offer for Dynegy Inc, the Texas energy company, saying that the $4.7 billion bid represents a ‘full and fair’ price, according to a Reuters report. Blackstone is currently offering $4.50 a share, but the shares have been trading higher than the bid, suggesting that some expect Blackstone to raise its bid.

(Reuters) – Blackstone Group LP’s $4.7 billion bid for Dynegy Inc represents a “full and fair” price and a steep premium, a senior executive at the private equity firm said on Wednesday, indicating that there is no higher offer coming for the power producer.

Blackstone announced a $4.7 billion or $4.50 a share deal to buy Dynegy on August 13, a 62 percent premium over its closing price the previous day. However, the company’s shares have since been trading higher than the offer price, indicating that some expect Blackstone to raise its bid.

Blackstone indicated in an interview on Wednesday that a higher offer would not be forthcoming.

“We worked hard to try and understand this company and we submitted … a final offer of $4.50 a share,” said David Foley, a senior managing director in Blackstone’s private equity group who leads the company’s energy investments.

“The reason it wasn’t $4.51 is that we were willing to walk away at that price; we didn’t know if the board would accept it or not, but we felt that was a very full and fair offer and certainly a steep premium,” Foley added.

Foley added that gas prices have fallen since the deal was announced and Dynegy’s peer group of companies have traded lower.

Some of the company’s rivals are NRG Energy (NRG.N), Mirant (MIR.N) and RRI Energy (RRI.N). Natural gas prices have fallen nearly 13 percent since August 13.

“Honestly, I don’t think you can look at a single fact pattern … that would make anyone think that there’s either a likelihood of a competing bid or of our bid going up,” said Foley.

He said that Blackstone had an opportunity to give its “best and final offer and that’s what it was.”

GO-SHOP OVER

Dynegy held a “go-shop” period — where rival bidders could have expressed interest — which ended on September 22.

The power company said in a letter to shareholders on Wednesday that while it solicited interest from 16 potential buyers, no party made a superior proposal to Blackstone’s.
It also said that conditions had deteriorated since Blackstone’s offer, citing low and declining commodity prices, continued economic weakness and a challenging financial position.

“I can understand during the go-shop period why the shares may have traded above the offer,” said Foley. “But I was very surprised that the stock has continued to trade above the offer (after the go-shop ended).”

Blackstone’s deal for Dynegy was unusually structured. It includes a $1.36 billion deal signed at the same time to sell four of Dynegy’s natural gas-fired power plants to NRG Energy Inc. Most of the price of the deal is made up of debt, with $543 million equity.

Shareholder approval requires just over 50 percent in favor to go through and a vote is scheduled for November 17.

“If we don’t get the shareholder support, I think the company doesn’t do this deal and things look pretty bleak for the company as a public company,” said Foley.

Dynegy’s shares closed 5 cents lower at $4.64.

(Reporting by Megan Davies. Editing by Gerald E. McCormick, Robert MacMillan and Matthew Lewis)