Dynegy shares soar 60 percent on deal to be taken private by Blackstone for $542.7 million

Blackstone taking Dynegy private for $542.7M

NEW YORK — Asset manager Blackstone Group said Friday it is paying $542.7 million to take Dynegy Inc. private in a three-way deal that will see Dynegy also sell four power plants to NRG Energy Inc.

New York-based Blackstone is taking on more than $4 billion in Dynegy debt as well, bringing the deal’s total value to $4.7 billion.

Dynegy said its shareholders will receive $4.50 per share in cash for its nearly 120.6 million shares outstanding, representing a 62 percent premium to the stock’s closing price on Thursday. Shares jumped $1.75, nearly 63 percent, to close at $4.53 Friday. Blackstone shares fell 38 cents, or 3.5 percent, to $10.63.

Dynegy owns power plants around the country and sells electricity mostly to wholesale markets in New York, California and the Midwest. The company has struggled as energy prices fell during the recession. Last year it sold eight plants and one under development, representing about a quarter of its generation, for $1.5 billion in cash and stock to LS Power and used the proceeds to pay down debt. It lowered its profit outlook several times last year and wrote down the value of its plants. The Houston-based company reported losses of $1.2 billion in 2009 and posted an additional loss of $191 million in the latest quarter that ended June 30.

Its shares have tumbled 79 percent over the past 52 weeks.

“Dynegy’s board of directors believes the proposed transaction with Blackstone provides our stockholders with a significant premium over the current stock price and removes the risks to the existing stockholders associated with volatile commodity prices, challenging capital markets and environmental and regulatory uncertainties,” said Bruce A. Williamson, Dynegy chairman, president and CEO.

Dynegy said it is allowed to solicit other bids for the next 40 days. The company expects to hold a special stockholder meeting on the Blackstone deal in the fourth quarter, with the acquisition expected to close by the end of the year.

In conjunction with its sale to Blackstone, Dynegy is selling four natural gas-fired power plants in California and Maine to NRG Energy for $1.36 billion in cash. The transaction includes the Casco Bay facility in Maine and the Moss Landing, Morro Bay and Oakland facilities in California. NRG says the move will fill the gap in its combined-cycle portfolio in its main markets. The companies expect the deal to close by year-end.

Separately, NRG also is buying the Cottonwood generating station, a natural gas-fueled plant in the Entergy zone of east Texas, from Kelson LP for $525 million. NRG, based in Princeton, N.J., said it will fund both deals with cash and other financing. The company expects the transactions will add to free cash flow immediately. NRG shares fell 20 cents to $22.21 in morning trading.

The deals lifted shares of other power providers Friday. Shares of RRI Energy Inc. rose 22 cents, or 6.5 percent, to $3.59, while shares of Calpine Corp. jumped 58 cents, or 4.6 percent, to $13.09. Mirant Corp. rose 44 cents, or 4.6 percent, to $9.97.

Goldman, Sachs & Co. and Greenhill & Co. LLC acted as financial advisers to Dynegy, and Credit Suisse Securities (USA) LLC and Blackstone Advisory Partners advised Blackstone.