Wholesale Power Generator Dynegy to Be Acquired by Blackstone Affiliate

Steven Schwarzman, Blackstone Group
Steven Schwarzman, Blackstone Group

Dynegy (DYN) has agreed to be acquired by an affiliate of Steven Schwarzman's (pictured) Blackstone Group (BX) in a transaction valued at approximately $4.7 billion, including the assumption of existing debt. Blackstone will pay $4.50 per share in cash for Dynegy, a wholesale power generator. That's a 62% premium to the closing share price of $2.78 Thursday.

"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 Dynegy Chairman, President and CEO Bruce Williamson in a statement. He added: "We believe they [Blackstone] are well positioned to lead Dynegy going forward as a private company."

Under the merger agreement, the power company is permitted to solicit alternative proposals from third parties for a period of 40 days after the date of the merger agreement.

An Additional Element

The transaction is expected to close by the end of 2010. While Dynegy's board has already approved the merger, Dynegy shareholders still needs to approve, and it's subject to regulatory review. The transaction isn't subject to any financing conditions.

In addition, NRG Energy (NRG) has agreed with Blackstone to acquire four natural-gas-fired assets currently owned by Dynegy for approximately $1.36 billion in cash. "The consummation of the merger transaction between Dynegy and Blackstone is contingent upon the concurrent closing of the Blackstone and NRG Energy transaction," the press release stated.

Dynegy shares soared some 61% in premarket trading, while Blackstone's declined 1.7%.