Sunday, August 15, 2010

Blackstone and Dynegy

The Blackstone Group and Dynegy Inc. have entered into a definitive merger agreement. Dynegy stockholders will receive $4.50 in cash for each of their shares. This is a 62% premium on the closing share price as of the Thursday, August 12.

Separately, but not-so-separately, Blackstone and NRG Energy have entered into an agreement through which NRG will buy four natural gas-fired assets currently owned by Dynegy for a total cash consideration of $1.36 billion. Three of the facilities involved are in California, the other is at Casco Bay, Maine.

The closing of the merger transaction between Dynegy and Blackstone is contingent upon the concurrent closing of the Blackstone and NRG deal.

News involving Dynegy always perks up my ears because Dynegy was involved in the big energy-markets story of 2001, the demise-of-Enron. Dynegy was the white knight who never quite arrived to save the damsel from the dragon of insolvency.

That's an episode that goes unmentioned in the company's official version of its own history. But there is a fine account, with some Dynegy background, in the Smith/Emshwiller book n Enron's fall.

Smith/Emshwiller tell us that the companies jointly announced a merger agreement at 5 PM Houston time, November 9, 2001. "Who would have imagined it? Enron officials had looked down on Dynegy as one of the little kids on the energy block, with assets of a 'mere' $25 billion compared with Enron's more than $60 billion. The planned merger was just one more example of the unintended consequences of the Enron debacle...."

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