GOLD at a level to SELL! Late longs get out.
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Dynegy warns it may have to file for bankruptcy
Dynegy may file for bankruptcy protection if it can't meet creditors' earnings thresholds
Dynegy CEO to step down as Icahn deal fails
Dynegy Announces Board and Management Restructuring
Dynegy (NYSE:DYN)
Intraday Stock Chart
Today : Monday 21 February 2011
Dynegy Inc. (NYSE: DYN) today announced that Bruce A. Williamson, pursuant to a mutual agreement with the Board of Directors, will resign as President and Chief Executive Officer, effective March 11, 2011. Mr. Williamson has also resigned as a director and Chairman of the Board, effective immediately. David Biegler, currently an independent Dynegy director, has been appointed interim President and Chief Executive Officer following the departure of Mr. Williamson, and Patricia A. Hammick, previously Lead Director of Dynegy, now serves as Chairman of the Board.
Dynegy also announced that effective March 11, 2011, Holli Nichols will resign as Executive Vice President and Chief Financial Officer, to accept an opportunity at another company. Charles C. Cook, Dynegy’s Executive Vice President, Commercial Operations and Market Analytics, will serve as interim CFO following the departure of Ms. Nichols.
“Bruce has guided Dynegy through numerous challenges over his eight year tenure, including stabilizing the Company at a time of great uncertainty, reducing the Company’s outstanding debt by more than $10 billion, implementing a comprehensive program to reduce environmental emissions from the Midwest coal fleet and setting a new strategic direction by focusing on the electric generation business while exiting unrelated lines of business,” said Patricia A. Hammick, Dynegy’s new Chairman. “Holli has been a valuable member of the executive team and has also made several important contributions to the Company. Throughout the leadership transition, we will continue to take appropriate actions to position the Company for the future.”
Dynegy Announces Termination of IEP Merger Agreement
An insufficient number of shares were tendered in response to the Icahn Enterprises L.P. (NYSE: IEP) (“IEP”) tender offer, and as a result the merger agreement with an affiliate of IEP automatically terminated as of 5:00 p.m. (Eastern time) on February 18, 2011.
Board Changes
Recognizing the desire of the stockholders to pursue a different path, Dynegy’s five remaining directors do not intend to stand for reelection at the Company’s upcoming annual meeting, anticipated to be held in June 2011.
Dynegy’s Board has met with and offered a Seneca Capital nominee a position as a director of Dynegy. Dynegy has also contacted Icahn Associates to discuss appointing an Icahn designee to the Board. The Board’s Nominating Committee is expected to consist of new directors and will begin identifying qualified director nominees to be appointed as soon as possible and to stand for election at the Company’s annual meeting.
Ms. Hammick said, “Through these actions, the Board is positioning Dynegy for a new management and Board structure as soon as prudent. We are open to stockholder suggestions as to additional independent directors. Dynegy will not expend any further resources in responding to the Seneca Capital consent solicitation, if Seneca chooses to pursue it. While all current directors intend to remain fully engaged in their duties through the 2011 Dynegy annual meeting, we expect the new members of the Board to take the lead in defining the future composition of the Board and in selecting a new chief executive officer.”
Dynegy Amends Stockholder Protection Rights Plan
The Dynegy Board has amended the Stockholder Protection Rights Plan (the “Rights Plan”) announced on November 23, 2010, which declared a dividend of one stock purchase right (collectively, the “Rights”) for each share of common stock held by stockholders of record as of the close of business on December 2, 2010. The amendment increases from 10% to 20% the level of beneficial ownership of Dynegy shares that triggers adverse consequences under the Rights Plan. All other terms of the plan remain unchanged, including that the Rights Plan will expire unless approved by Dynegy stockholders at the next annual meeting.
Dynegy Implements Plans to Preserve Stockholder Value and to Continue Operating as an Independent Company
Dynegy has been implementing a number of initiatives to respond to the current environment. Consistent with those initiatives, on February 3, 2011, Dynegy implemented a significant cost reduction program, including the elimination of approximately 135 positions across all of the Company’s functional and geographic areas. Labor and non-labor annual savings of approximately $50 million are expected to result from the cost reduction program and this level of savings is consistent with the prior forecasts publicly provided by Dynegy.
Patricia A. Hammick, age 64, is the former Senior Vice President, Strategy and Communications for Columbia Energy Group. She previously served as an adjunct Professor at George Washington University's Graduate School of Political Management and as Chief Operations Officer of the National Gas Supply Association. Ms. Hammick is a Director of Consol Energy, Inc. and SNC-Lavalin Group, Inc. A Dynegy Director since 2003, Hammick was elected Lead Director in May 2004.
David W. Biegler, age 64, is the Chairman and Chief Executive Officer of Southcross Energy, LLC. He previously served as Chairman of Regency Gas Services, LLC.; Vice Chairman, President and Chief Operating Officer of TXU Corp. and Chairman, President and Chief Executive Officer of ENSERCH Corp. Mr. Biegler serves as a Director of Trinity Industries, Inc.; Austin Industries, Inc.; Southwest Airlines Co.; Animal Health International, Inc. and Children’s Medical Center. Mr. Biegler has served as a Dynegy Director since 2003.
Charles C. Cook, age 46, has served as Dynegy’s Executive Vice President, Commercial Operations and Market Analytics, where he is responsible for Dynegy’s commercial and asset management functions related to the company’s power generation assets. Mr. Cook joined Dynegy’s predecessor Destec Energy, Inc. in 1991. When that company was acquired by Dynegy, Mr. Cook joined the Treasury group. He has held positions of increasing responsibility including Vice President; Vice President and Assistant Treasurer; Senior Vice President and Treasurer; and Senior Vice President of Strategic Planning, Corporate Business Development and Treasurer.
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 11,800 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil. For more information, please visit www.dynegy.com.
This press release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward looking statements." Discussion of risks and uncertainties that could cause actual results to differ materially from current projections, forecasts, estimates and expectations of Dynegy is contained in Dynegy's filings with the Securities and Exchange Commission (the "SEC"). Specifically, Dynegy makes reference to, and incorporates herein by reference, the section entitled "Risk Factors" in its most recent Form 10-K and subsequent reports on Form 10-Q. In addition to the risks and uncertainties set forth in Dynegy's SEC filings, the forward-looking statements described in this press release could be affected by, among other things, (i) the timing and anticipated benefits to be achieved through Dynegy's 2010-2013 company-wide cost savings program; (ii) beliefs and assumptions relating to liquidity, available borrowing capacity and capital resources generally; (iii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which Dynegy is, or could become, subject; (iv) beliefs about commodity pricing and generation volumes; (v) anticipated liquidity in the regional power and fuel markets in which Dynegy transacts, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties; (vi) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (vii) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the potential for a market recovery over the longer term; (viii) the effectiveness of Dynegy's strategies to capture opportunities presented by changes in commodity prices and to manage its exposure to energy price volatility; (ix) beliefs and assumptions about weather and general economic conditions; (x) beliefs regarding the U.S. economy, its trajectory and its impacts, as well as Dynegy's stock price; (xi) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xii) expectations regarding Dynegy's revolver capacity, credit facility compliance, collateral demands, capital expenditures, interest expense and other payments; (xiii) Dynegy's focus on safety and its ability to efficiently operate its assets so as to maximize its revenue generating opportunities and operating margins; (xiv) beliefs about the outcome of legal, regulatory, administrative and legislative matters; (xv) expectations and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs; and (xvi) uncertainties associated with the consent solicitation (the "Seneca Capital Solicitation") engaged in by Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch ("Seneca Capital"). Any or all of Dynegy's forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond Dynegy's control.
Seneca Capital, the second largest shareholder of Dynegy Inc. (NYSE: DYN) with a 12% economic interest (including 9.3% voting common stock), is pleased to announce that its consent solicitation materials are now effective and Seneca Capital will gather shareholder consents to replace the Dynegy Chairman and one other Dynegy Board member with Hunter Harrison, a pioneering railroad executive, and Jeff Hunter, a successful power industry veteran. The definitive consent solicitation materials can be accessed at http://www.myproxyonline.com/savingdynegy. Early next week, Seneca Capital will be requesting a record date for the consent solicitation and then Dynegy must provide one that is within 20 days. After the record date, Seneca Capital will gather shareholder consents and if consents for greater than 50% of shares have been gathered, the nominees will be seated on the Dynegy Board.
Seneca Capital believes that Mr. Harrison and Mr. Hunter should provide substantial value-added to the Dynegy Board through their proven ability to create shareholder value, drive cost efficiencies and provide specialized knowledge regarding coal transportation (in the case of Mr. Harrison) and financing (in the case of Mr. Hunter). Mr. Harrison and Mr. Hunter are fully aligned with the proposition of driving value for Dynegy shareholders – Mr. Harrison has already purchased 500,000 shares personally and Mr. Hunter has committed to purchase 300,000 shares while serving on the Dynegy Board. In addition, Seneca Capital believes its proposals contained in the consent solicitation as to strategic review, the optimization of Dynegy’s debt and cost cut opportunities each have enormous potential to unlock significant intrinsic value for Dynegy’s shareholders.
Seneca Capital believes that once the IEP tender offer at $5.50 per share is defeated TOMORROW, an overhang will be removed that will enable substantial investor interest in the stock. Defeating the tender offer will also allow investors to participate in the positive changes (including Board/management alignment with shareholders) at Dynegy that Seneca Capital is working to advance.
Seneca Capital urges shareholders to NOT TENDER their stock for $5.50 per share. It is the WRONG PRICE at the WRONG TIME for the WRONG REASONS.
FORWARD-LOOKING STATEMENTS; STATEMENT OF SENECA CAPITAL BELIEFS; FORECASTS
This press release contains statements, including Seneca Capital’s beliefs as to valuation, which are forward looking statements about future events and sets forth a presentation of our beliefs. The forward-looking statements are not guarantees of future performance, and we caution you not to rely unduly on them. You should be aware that any forward-looking statements are based on certain assumptions and subject to risks and uncertainties that exist in the business environment that could render actual outcomes and results that are materially different. We have based many of these forward-looking statements on our beliefs, expectations and assumptions about future events that may prove to be inaccurate. While we consider these beliefs, expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to anticipate and many of which are beyond our control. We caution you that the forward-looking statements are inherently uncertain and necessarily involve risks that may affect Dynegy Inc.’s (“Dynegy”) business prospects and performance, causing actual results to differ from those discussed or presented in this presentation. Without limiting the generality of the foregoing, Seneca Capital’s beliefs as to future value are based on a variety of assumptions as to the future that Seneca Capital believes constitute a reasonable, potential valuation scenario that could develop within the next several years for Dynegy but which are nonetheless subject to risks and uncertainties that exist in the business environment that could render actual outcomes and results materially different than anticipated. Seneca Capital’s beliefs as to current value are based on a variety of assumptions, including as to the future, that Seneca Capital believes constitute reasonable assumptions but which are nonetheless subject to risks and uncertainties that exist in the business environment that could render actual outcomes and results that are materially different.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch (together with each of the foregoing, “Seneca”) have jointly made a preliminary filing with the Securities and Exchange Commission (“SEC”) of a consent statement and a consent card to be used to replace two members of the Dynegy Board of Directors and to adopt certain other proposals set forth in the consent statement.
SENECA ADVISES ALL STOCKHOLDERS OF DYNEGY TO READ THE CONSENT STATEMENT AND OTHER CONSENT SOLICITATION MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT HTTP://WWW.SEC.GOV. IN ADDITION THE PARTICIPANTS IN THE CONSENT SOLICITATION WILL PROVIDE COPIES OF THE DEFINITIVE CONSENT STATEMENT, ONCE AVAILABLE, WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ CONSENT SOLICITOR AT THE TELEPHONE NUMBER INCLUDED IN THE DEFINITIVE CONSENT STATEMENT, ONCE AVAILABLE.
Each of Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC, Douglas A. Hirsch, E. Hunter Harrison and Jeff D. Hunter is a participant in this solicitation. Douglas A. Hirsch is the managing member of each of Seneca Capital Investments, LLC, Seneca Capital International GP, LLC and Seneca Capital Advisors, LLC. The principal occupation of Mr. Hirsch is investment management. Seneca Capital Investments, LLC is the general partner of Seneca Capital Investments, L.P. Seneca Capital International GP, LLC is the general partner of Seneca Capital International Master Fund, L.P., and Seneca Capital Advisors, LLC is the general partner of Seneca Capital, L.P. The principal business address of Mr. Hirsch, Seneca Capital Investments, LLC, Seneca Capital Investments, L.P., Seneca Capital International GP, LLC, Seneca Capital International Master Fund, L.P., Seneca Capital Advisors, LLC and Seneca Capital, L.P. is c/o Seneca Capital Investments, LP, 590 Madison Avenue, 28th Floor, New York, New York 10022.
As of February 16, 2011, Seneca Capital International Master Fund, L.P. beneficially owned 7,712,100 shares of Dynegy’s common stock, par value $0.01 per share (“Shares”), representing beneficial ownership of approximately 6.4% of the Shares. As of February 16, 2011, Seneca Capital, L.P. beneficially owned 3,514,400 Shares, representing beneficial ownership of approximately 2.9% of the Shares. Each of Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, and Mr. Hirsch may be deemed to beneficially own 11,226,500 Shares, representing beneficial ownership of approximately 9.3% of the Shares, held in the aggregate by Seneca Capital International Master Fund, L.P. and Seneca Capital, L.P. Seneca Capital International GP, LLC may be deemed to beneficially own 7,712,100 Shares, representing beneficial ownership of approximately 6.4% of the Shares, held by Seneca Capital International Master Fund, L.P. Seneca Capital Advisors, LLC may be deemed to beneficially own 3,514,400 Shares, representing beneficial ownership of approximately 2.9% of the Shares, held by Seneca Capital, L.P.
As of February 16, 2011, Seneca Capital International Master Fund, L.P. and Seneca Capital, L.P. held European-style call options, providing the right to purchase 2,331,400 and 1,059,600 shares, respectively at an exercise price of $0.01 per share by delivery of notice of exercise as of September 17, 2011.
Dear Dynegy Stockholders:
You have an opportunity to decide whether Dynegy should sell itself to a financially stronger entity and provide all stockholders with a known value today, or alternatively, continue to work through significant financial challenges. We believe that tendering your shares into the all-cash tender offer made by an affiliate of Icahn Enterprise L.P. (“IEP”) is the best outcome for all Dynegy stockholders. As we have said before, the Special Committee of your Board of Directors unanimously believes that accepting known premium value today is superior to the risks of continuing as an independent company.
We have come to this belief based on our years of experience with Dynegy, our collective understanding of Dynegy’s earnings potential and the variables that affect those earnings, and utilizing the advice of two independent financial advisors, Goldman Sachs and Greenhill, who have worked to perform financial analysis of Dynegy in the current market and under a variety of scenarios. It is our view that the current commodity price and regulatory environment, combined with Dynegy’s cash flow and debt profile, significantly challenge Dynegy’s ability to match the IEP return for our equity holders.
We believe our decision to recommend acceptance of the tender offer is further validated by the fact that Dynegy has recently completed two comprehensive “go-shop” periods totaling over 100 days. In the latest “go-shop” process, several firms performed due diligence including two who worked extensively but elected not to make an offer. This is despite the fact that the potential bidders, which included two large private equity firms, had the ability to structure bids in a manner that would have required IEP to either top their offers or support them. During the past two years, with the assistance of two independent financial advisors, the Dynegy Board has considered a wide range of strategic alternatives – including remaining a stand-alone company, as well as the sale of various asset packages – with the goal of maximizing value for all Dynegy stockholders.
TENDER OFFER: On December 15, 2010, the Company entered into an Agreement and Plan of Merger with affiliates of IEP. On December 22, 2010, affiliates of IEP commenced a tender offer to purchase all of the outstanding shares of Dynegy common stock for $5.50 per share in cash, or approximately $665 million. The IEP tender offer is currently set to expire at 5 p.m., New York City time, on February 14, 2011.
The Dynegy Board, in consultation with its independent financial and legal advisors and based upon the recommendation of the Special Committee comprised solely of non-management independent directors, has unanimously determined that the tender offer is in the best interests of all Dynegy stockholders. The Dynegy Board recommends that Dynegy stockholders accept the tender offer and tender their Dynegy shares into the tender offer.
More Class Action.
More on Gold and Silver:
The majority of the down move in the metals market was caused by exchange regulators increasing the margin in these markets; squeezing out the weak longs. This provided the Banks (sellers of these products) to cover their shorts. The margin in Silver was increased each week for the pasted 3 weeks.
The margin in silver now stands at 11,138.00 for the 5,000 oz. contract. Take the spot price of silver: 28 x the contract size of 5,000 oz. equals 140,000.00. Doing the same for gold: spot 1350 x 100 oz. equals 135,000.00. Noteing that margin on gold is 6,751.00 per contract.
Where is the better use of your money? I think taking 6.7k to leverage 135k is better than using 11k to leverage 140k.
As goes Egypt so may go Saudi Arabia. Egypt controls the Suez Canal a major oil-shipping lane. The alternative routes is around South Africa. Egypt is an ally of Israel. All though that relationship has been weakened. Israel now has few if any friends left in the region and soon will be only the United States.
Dynegy did not get any rival offers challenging Carl Icahn's $665 million takeover bid. No interest in Dynegy. Blackstone's bid of 4.50 is off the table; Icanhn's bis is about 5.50; the market is @ 5.70; and the analyist say its worth more 7 - 8.50.
For Immediate Release from Seneca Capital; Saving Dynegy: For All Shareholders
Dynegy (NYSE:DYN)
Intraday Stock Chart
Today : Friday 21 January 2011
Seneca Capital, the second largest shareholder of Dynegy Inc. (NYSE: DYN) with a 12% economic interest (including 9.3% voting common stock) urges Dynegy shareholders to NOT TENDER their stock to Icahn Enterprises Holdings LP, an affiliate of Dynegy’s largest shareholder, for $5.50 per share. It is the WRONG PRICE at the WRONG TIME for the WRONG REASONS.
WRONG PRICE: Today Seneca Capital is filing with the Securities and Exchange Commission (SEC) a detailed presentation in support of its view that shareholders should reject the $5.50 per share tender offer. Seneca Capital has updated its valuation analysis to reflect the work of outside experts including a Big Four accounting firm’s analysis of cost cutting potential and a power price scenario analysis performed by Ventyx (Energy Velocity). Seneca Capital has more conviction than ever that selling Dynegy at a low price at this point in the cycle does not reflect Dynegy’s industry leading operating and financial leverage to a commodity recovery. Dynegy’s flexible capital structure and cost cutting potential provide additional levers to drive value regardless of commodity prices.
WRONG TIME: Dynegy stock has dramatically underperformed its IPP peers by nearly 30% and the overall market by more than 40% since its poorly received reverse split last March. In addition, several important potential positive catalysts related to pending EPA clean air rules are expected in the coming months (EPA HAPS/MACT proposed rules as soon as March, PJM capacity auction in May and potential MISO capacity market rules by June). Seneca Capital remains shocked and disappointed that – after shareholders resoundingly rejected two proposed Blackstone mergers – the Special Committee of Dynegy’s Board abandoned its November 23rd promise to “carefully review its standalone restructuring alternatives” in order to attempt again to sell the company.
WRONG REASONS: Management stands to benefit from $36 million in change-of-control severance payments (nearly 6% of Dynegy’s equity value) that are largely irrespective of the deal price. The Special Committee of Dynegy’s Board that abandoned its promise of a “careful standalone review” in favor of yet another sale agreement and an ill-timed auction for Dynegy during the heart of the holiday season, is comprised of members that have only purchased a combined total of less than 16,000 shares.
PURSUING CHANGE: Seneca Capital continues to vigorously pursue a consent solicitation to protect shareholder value by replacing the Chairman and one other Board member with Hunter Harrison, a pioneering railroad executive, and Jeff Hunter, a successful power industry veteran. Mr. Harrison and Mr. Hunter are fully aligned with the proposition of driving value for Dynegy shareholders – Mr. Harrison has already purchased 500,000 shares personally and Mr Hunter has committed to purchase 300,000 shares while serving on the Board.
Seneca Capital is currently working diligently towards achieving definitive status for its preliminary consent solicitation. Dynegy must provide a record date for the consent solicitation that is no later than 20 days from the date of a request by Seneca Capital. Once the preliminary consent solicitation becomes definitive, Seneca Capital will begin gathering shareholder consents and once consents for a majority of shares outstanding have been collected, Seneca’s nominees must be seated on the Dynegy Board.
WAIVING ONEROUS RESTRICTIONS: Given the restrictive nature of Dynegy’s poison pill (and our expectations for failure of the tender offer), Seneca Capital today sent a letter to The Special Committee of Dynegy’s Board seeking an immediate waiver to permit Seneca Capital to work in concert with others for the purpose of acquiring additional Dynegy common stock at a price greater than $5.50 per share. Because the Board of Directors has already approved the currently outstanding tender offer at $5.50 per share, Seneca Capital believes the Board should facilitate the development of potential opportunities for Dynegy shareholders to sell stock at a higher price, regardless of whether the buyers are already shareholders.
Seneca Capital urges shareholders to NOT TENDER their stock for $5.50 per share. It is the WRONG PRICE at the WRONG TIME for the WRONG REASONS.
FORWARD-LOOKING STATEMENTS; STATEMENT OF SENECA CAPITAL BELIEFS; FORECASTS
This press release contains statements, including Seneca Capital’s beliefs as to valuation, which are forward looking statements about future events and sets forth a presentation of our beliefs. The forward-looking statements are not guarantees of future performance, and we caution you not to rely unduly on them. You should be aware that any forward-looking statements are based on certain assumptions and subject to risks and uncertainties that exist in the business environment that could render actual outcomes and results that are materially different. We have based many of these forward-looking statements on our beliefs, expectations and assumptions about future events that may prove to be inaccurate. While we consider these beliefs, expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to anticipate and many of which are beyond our control. We caution you that the forward-looking statements are inherently uncertain and necessarily involve risks that may affect Dynegy Inc.’s (“Dynegy”) business prospects and performance, causing actual results to differ from those discussed or presented in this presentation. Without limiting the generality of the foregoing, Seneca Capital’s beliefs as to future value are based on a variety of assumptions as to the future that Seneca Capital believes constitute a reasonable, potential valuation scenario that could develop within the next several years for Dynegy but which are nonetheless subject to risks and uncertainties that exist in the business environment that could render actual outcomes and results materially different than anticipated. Seneca Capital’s beliefs as to current value are based on a variety of assumptions, including as to the future, that Seneca Capital believes constitute reasonable assumptions but which are nonetheless subject to risks and uncertainties that exist in the business environment that could render actual outcomes and results that are materially different.
THIRD-PARTY INFORMATION
This press release contains references to third-party sources of information and we make no representation or warranty as to the accuracy or completeness thereof. Neither Ventyx nor the Big Four Accounting Firm have provided any representation or warranty as to the accuracy of information provided in their reports and you may not rely on their reports. In addition, the referenced report of the Big Four Accounting Firm has been provided in preliminary form, and notes further investigation, validation and diligence is required. Their report does not constitute an audit, examination or review in accordance with standards established by the American Institute of Certified Public Accountants and firm has not otherwise verified the information obtained or presented in their report.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch (together with each of the foregoing, “Seneca”) have jointly made a preliminary filing with the Securities and Exchange Commission (“SEC”) of a consent statement and a consent card to be used to replace two members of the Dynegy Board of Directors and to adopt certain other proposals set forth in the consent statement.
SENECA ADVISES ALL STOCKHOLDERS OF DYNEGY TO READ THE CONSENT STATEMENT AND OTHER CONSENT SOLICITATION MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT HTTP://WWW.SEC.GOV. IN ADDITION THE PARTICIPANTS IN THE CONSENT SOLICITATION WILL PROVIDE COPIES OF THE DEFINITIVE CONSENT STATEMENT, ONCE AVAILABLE, WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ CONSENT SOLICITOR AT THE TELEPHONE NUMBER INCLUDED IN THE DEFINITIVE CONSENT STATEMENT, ONCE AVAILABLE.
Each of Seneca Capital International Master Fund, L.P., Seneca Capital, L.P., Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, Seneca Capital International GP, LLC, Seneca Capital Advisors, LLC and Douglas A. Hirsch is a participant in this solicitation. Douglas A. Hirsch is the managing member of each of Seneca Capital Investments, LLC, Seneca Capital International GP, LLC and Seneca Capital Advisors, LLC. The principal occupation of Mr. Hirsch is investment management. Seneca Capital Investments, LLC is the general partner of Seneca Capital Investments, L.P. Seneca Capital International GP, LLC is the general partner of Seneca Capital International Master Fund, L.P., and Seneca Capital Advisors, LLC is the general partner of Seneca Capital, L.P. The principal business address of Mr. Hirsch, Seneca Capital Investments, LLC, Seneca Capital Investments, L.P., Seneca Capital International GP, LLC, Seneca Capital International Master Fund, L.P., Seneca Capital Advisors, LLC and Seneca Capital, L.P. is c/o Seneca Capital Investments, LP, 590 Madison Avenue, 28th Floor, New York, New York 10022.
As of January 20, 2011, Seneca Capital International Master Fund, L.P. beneficially owned 7,712,100 shares of Dynegy’s common stock, par value $0.01 per share (“Shares”), representing beneficial ownership of approximately 6.4% of the Shares. As of January 20, 2011, Seneca Capital, L.P. beneficially owned 3,514,400 Shares, representing beneficial ownership of approximately 2.9% of the Shares. Each of Seneca Capital Investments, L.P., Seneca Capital Investments, LLC, and Mr. Hirsch may be deemed to beneficially own 11,226,500 Shares, representing beneficial ownership of approximately 9.3% of the Shares, held in the aggregate by Seneca Capital International Master Fund, L.P. and Seneca Capital, L.P. Seneca Capital International GP, LLC may be deemed to beneficially own 7,712,100 Shares, representing beneficial ownership of approximately 6.4% of the Shares, held by Seneca Capital International Master Fund, L.P. Seneca Capital Advisors, LLC may be deemed to beneficially own 3,514,400 Shares, representing beneficial ownership of approximately 2.9% of the Shares, held by Seneca Capital, L.P.
As of January 20, 2011, Seneca Capital International Master Fund, L.P. and Seneca Capital, L.P. held European-style call options, providing the right to purchase 2,331,400 and 1,059,600 shares, respectively at an exercise price of $0.01 per share by delivery of notice of exercise as of April 15, 2011.
Dynegy Adopts Stockholder Protection Rights Plan
Dynegy (NYSE:DYN)
Intraday Stock Chart
Today : Tuesday 23 November 2010
Dynegy Inc. (NYSE: DYN) today announced that its Board of Directors has adopted a Stockholder Protection Rights Plan (the “Rights Plan”) and declared a dividend of one stock purchase right (collectively, the “Rights”) for each share of common stock held by stockholders of record as of the close of business on December 2, 2010.
The Board of Directors adopted this short term, narrowly tailored Rights Plan to prevent any person from obtaining control or de facto control of Dynegy without offering a control premium to all Dynegy stockholders. The issuance of the Rights is not intended to prevent a sale of control of the company that is determined by the Board of Directors to be fair, advisable and in the best interests of all Dynegy stockholders. The Rights Plan provides that, unless terminated earlier by the company, the Rights will expire following Dynegy’s next annual meeting of stockholders after the filing of Dynegy’s annual report on Form 10-K for the fiscal year 2010, unless the Rights Plan is approved by Dynegy’s stockholders (in which case it will expire at the first subsequent annual meeting at which it is not approved by a stockholder vote).
The Rights will be distributable to stockholders on the next business day following the earliest of (i) the tenth business day after the commencement of a tender or exchange offer that, if consummated, would result in any person owning 10% or more of Dynegy’s common stock (unless Dynegy’s Board of Directors decides to delay the distribution), (ii) Dynegy announcing that a person or group has acquired 10% or more of Dynegy’s common stock, and (iii) any person or group acquiring more than 30% of Dynegy’s common stock. Following such distribution, each Right will entitle its holder to purchase fractions of Participating Preferred Stock having economic and voting terms similar to those of one share of the Company’s common stock for an exercise price of $12.50 (subject to adjustment).
The Rights will be exercisable for shares of Dynegy common stock if Dynegy announces that a person or group has acquired 10% or more of Dynegy’s common stock or any person or group acquires more than 30% of Dynegy’s common stock. Under the Rights Plan, synthetic ownership of Dynegy’s common stock in the form of certain derivative securities counts towards the 10% and 30% ownership thresholds, if Dynegy’s Board of Directors determines that the owner of such derivative securities is seeking to use the existence of such securities for the purpose or effect of changing or influencing control of the company. Dynegy’s Board has made such a determination with respect to certain Icahn affiliated entities and with respect to Seneca Capital entities.
The Rights Plan exempts any person owning 10% or more of Dynegy’s common stock as of the announcement of the Rights Plan. However, the Rights also will be exercisable if a person or group that already owns 10% or more of Dynegy’s common stock acquires any additional shares (including through derivatives, but other than pursuant to a dividend or distribution paid or made by the company or pursuant to a stock split or reclassification).
The Rights Plan also exempts from its provisions all-cash, fully financed offers for all outstanding shares of Dynegy’s common stock that provide for a per share price in excess of $5.00 and meet certain other requirements.
If the Rights become exercisable for Dynegy’s common stock, all Rights holders (other than the person or group triggering the Rights) will be entitled to purchase Dynegy’s common stock at a 50% discount. For example, if at the time the Rights become exercisable for Dynegy’s common stock the exercise price is still $12.50 and Dynegy’s common stock has a per share market value of $5, each Right would be exercisable for five shares of common stock ($25 of market value) at an exercise price of $12.50, i.e., five shares of common stock at a 50% discount. Rights held by the person or group triggering the Rights will become void and will not be exercisable. If any person or group acquires between 10% and 50% of Dynegy’s common stock, Dynegy’s Board of Directors may, at its option, cause the exchange of one share of Dynegy common stock for each Right.
The distribution of the Rights is not taxable to stockholders. Until their distribution, the Rights will trade with Dynegy’s common stock. The Dynegy Board may terminate the Rights Plan prior to the time the Rights are triggered. Further details about the Rights Plan will be contained in a Form 8-K to be filed with the Securities and Exchange Commission by Dynegy. Dynegy will also mail a letter to stockholders regarding the Rights Plan along with a summary of certain terms of the Rights Plan.
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy, capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 12,200 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil.
Cautionary Statement Regarding Forward-Looking Statements
This release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements". All statements included or incorporated by reference in this release, other than statements of historical fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate", "estimate", "project", "forecast", "plan", "may", "will", "should", "expect" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following: (i) the timing and anticipated benefits to be achieved through our 2010-2013 company-wide cost savings program; (ii) beliefs and assumptions relating to liquidity, available borrowing capacity and capital resources generally; (iii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which we are, or could become, subject; (iv) beliefs about commodity pricing and generation volumes; (v) anticipated liquidity in the regional power and fuel markets in which we transact, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties; (vi) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (vii) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the potential for a market recovery over the longer term; (viii) the effectiveness of our strategies to capture opportunities presented by changes in commodity prices and to manage our exposure to energy price volatility; (ix) beliefs and assumptions about weather and general economic conditions; (x) beliefs regarding the U.S. economy, its trajectory and its impacts, as well as Dynegy’s stock price; (xi) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xii) beliefs and expectations regarding the Plum Point Project; (xiii) expectations regarding our revolver capacity, credit facility compliance, collateral demands, capital expenditures, interest expense and other payments; (xiv) our focus on safety and our ability to efficiently operate our assets so as to maximize our revenue generating opportunities and operating margins; (xv) beliefs about the outcome of legal, regulatory, administrative and legislative matters; (xvi) expectations and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs; and (xvii) uncertainties associated with the proposed merger of Dynegy and an affiliate of Blackstone (the “Merger”), including uncertainties relating to the anticipated timing of filings and approvals relating to the Merger and the sale by an affiliate of Blackstone of certain assets to NRG Energy, Inc. (the "NRG Sale"), the outcome of legal proceedings that have been or may be instituted against Dynegy and/or others relating to the Merger and/or the NRG Sale, the expected timing of completion of the Merger and the NRG Sale, the satisfaction of the conditions to the consummation of the Merger and the NRG Sale and the ability to complete the Merger and the NRG Sale.
Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, Dynegy filed a definitive proxy statement with the SEC on October 4, 2010, and commenced mailing the definitive proxy statement and form of proxy to the stockholders of Dynegy. BEFORE MAKING ANY VOTING DECISION, DYNEGY'S STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Dynegy’s stockholders are able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. Dynegy’s stockholders are also able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents by directing a request by mail or telephone to Dynegy Inc., Attn: Corporate Secretary, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002, telephone: (713) 507-6400, or from Dynegy’s website, http://www.dynegy.com.
PARTICIPANTS IN THE SOLICITATION
Dynegy and its directors and officers may be deemed to be participants in the solicitation of proxies from Dynegy’s stockholders with respect to the Merger. Information about Dynegy’s directors and executive officers and their ownership of Dynegy’s common stock is set forth in the proxy statement for Dynegy’s 2010 Annual Meeting of Stockholders, which was filed with the SEC on April 2, 2010. Stockholders may obtain additional information regarding the interests of Dynegy and its directors and executive officers in the Merger, which may be different than those of Dynegy’s stockholders generally, by reading the definitive proxy statement filed with the SEC on October 4, 2010 and other relevant documents regarding the Merger when filed with the SEC.
Dynegy Bargained With Blackstone for Higher Bid Price
By Jim Polson - Nov 18, 2010 3:04 PM CT
Dynegy Inc. squeezed more money from Blackstone Group LP and negotiated a lower breakup fee in the hours leading up to a scheduled shareholder vote on the private- equity firm’s $604.5 million takeover bid.
After persuading Blackstone to raise its bid, Dynegy postponed the vote yesterday until Nov. 23 to give shareholders time to consider the $5-a-share offer, the Houston-based power producer said in a filing today. The filing provides details of Dynegy’s negotiations with Blackstone before the revised offer was announced.
With its two largest shareholders opposing the transaction and saying it undervalued the power company, Dynegy told Blackstone on Nov. 15 that the initial offer of $540 million, or $4.50 a share, was at “material risk” of shareholder defeat, according to the filing. That evening, Blackstone agreed to raise its offer to $4.75 a share and proposed a $50 million breakup fee if shareholders still rejected the bid and Dynegy accepted another offer within 18 months. Dynegy said in the filing it continued to bargain for a better price. The night before the scheduled vote, Dynegy’s board accepted the terms now before shareholders: $5 a share with a $16.3 million breakup fee if shareholders reject the deal and the company is sold for more than $4.50 a share within 18 months.
Blackstone requested a delay in the vote to give shareholders more time to consider the new offer, according to the filing. The vote now closes at 4 p.m. Houston time on Nov. 23.
Shareholder Opposition
Blackstone’s revised offer values Dynegy at about $4.77 billion, including debt. Dynegy rose 9 cents, or 1.8 percent, to $5.15 at 4:02 p.m. in New York Stock Exchange composite trading.
Dynegy’s largest shareholders, billionaire investor Carl Icahn and hedge fund Seneca Capital, weren’t swayed by the higher price and reiterated their opposition. Seneca has said Dynegy is worth more than $6 a share now and as much as $18 once a better economy revives prices for power from its plants.
Delaying the vote “is a blatant effort to thwart the will of shareholders,” Seneca said yesterday in an e-mailed statement. Shareholders would’ve rejected the $5-a-share offer, Seneca said. Terms of the breakup fee are “virtually unprecedented” and a “violation of fiduciary duty,” the hedge fund said.
Blackstone’s demand for a breakup fee in exchange for a higher bid is “perfectly normal,” Elizabeth Nowicki, who teaches and researches breakup fees at Tulane University Law School in New Orleans, said yesterday in an interview.
Breakup Fee Strategy
The higher bid signals to potential rivals that Blackstone considered its first offer a bargain, and the breakup fee insulates it against a bidding war, she said.
Dynegy, worth almost $19 billion before it tried to swallow Enron Corp. in 2001, closed at an eight-year low of $2.78 a share the day before Blackstone’s original offer was announced on Aug. 13. Interest payments consumed about 12 percent of Dynegy’s third-quarter sales, contributing to its sixth quarterly loss in two years.
SHARES OUTSTANDING 11.8M; less than 5 mil. in market cap.
Gone with the wind; this one is done.
BINGO! lol
It looks like buy the rumor sell the news.
Just BINGO and "The trading volume in our Company's common stock has reached extraordinarily high levels over the past two trading days. In response to inquiries from shareholders and others, the Company reports that it is not aware of any material development which would account for the increase in share price and trading volume," commented Bill Fasig, the Company's President and Chief Executive Officer.
A 3 day run-up with a blow off top; looks like more downside. Took off 70% of my position today.
GMTC - Great Run
Dynegy Inc. (NYSE: DYN) issued the following message to its stockholders in response to the November 12, 2010 Schedule 13D amendment filed by Carl Icahn:
Dynegy stockholders are urged to consider Mr. Icahn’s filing in the overall context of the Dynegy Board of Directors’ extensive review of strategic alternatives, both stand-alone and transactional, over the past several years.
The only certain proposal that has ever been presented to the company and its stockholders throughout this multi-year review is the current proposal from Blackstone.
Any other ideas, non-binding alternatives, desires to re-run a sales process or similar potentialities bring with them risk to execution and the ultimate value that can be realized by common stockholders.
The non-binding Icahn credit facility proposal does not address Dynegy’s critical post-2012 liquidity issues or the fundamental effect on stockholder value of adding more debt on an already highly leveraged company.
Throughout the Dynegy Board’s extensive strategic review process, we have found only one potential transaction, the current one with Blackstone, which provides certain value to our common stockholders.
Failure to complete the Blackstone transaction would present stockholders with substantial continuing risk to commodity prices that have actually fallen significantly since the Blackstone transaction was approved and, therefore, to significant financial uncertainty.
This difference between certain value and significant future risk is the essence of the choice before our stockholders.
Additionally, stockholders should consider the following with respect to Mr. Icahn’s non-binding proposal:
Substituting one credit facility for another does not address Dynegy’s liquidity issues.
Mr. Icahn’s filing contains a non-binding proposal to provide Dynegy with a credit facility (the terms of which cannot be fully defined or finalized until well after the Special Meeting on November 17), which would not alleviate Dynegy’s liquidity challenges. Dynegy requires access to two types of capital. In the short-term, Dynegy requires funding of collateral, working capital and other temporary cash needs. Dynegy’s long-term capital needs require funding to address the projected $1.6 billion of negative free cash flow over the next 5 years1 resulting from the significant change in the U.S. natural gas market and significant environmental enforcement uncertainty. All of this non-discretionary cash will come out before any value can accrue to the common stockholder.
In addition, by almost all accounts, the time horizon for gas prices to recover is not imminent. At a November 9, 2010 conference, S&P analyst Swami Venkataraman spoke to the challenges facing companies like Dynegy:
“While there was a tremendous fall in gas prices in 2009, it was more reflective of the recession. But starting in 2010, we have seen how the forward curves have kept declining. Clearly, the shale gas was not felt in 2009, and starting in 2010, the forward curve began pricing that in much more than before… The shale gas story has not played out yet. It has a long way to go before it is settled.”
At the same conference, the S&P analyst, Mr. Venkataraman, also highlighted that the risks of being wrong on commodity price recovery are significant, saying:
“There is a chance that you could find more bankruptcies in 2012 and 2013, like we did in 2002 to 2004. Companies and projects that are over-leveraged are the most vulnerable.”
Dynegy is already leveraged at roughly 10x EBITDA compared to a peer group leverage of approximately 3.5x-6.5x EBITDA.
While the non-binding Icahn credit facility proposal would fulfill certain short-term capital needs, it does nothing to address Dynegy’s long-term funding requirements. Dynegy believes it would be able to access the credit markets for a credit facility (though smaller and more expensive than the current facility) to satisfy short-term funding needs, making any Icahn credit facility unnecessary. Indeed, this was specifically considered by Dynegy’s Board of Directors in analyzing the Blackstone transaction, as disclosed in Dynegy’s preliminary and definitive proxy statements first filed with the SEC on September 3, 2010. There, in describing the Board’s reasons for approving the merger, the belief that the existing credit facility could be amended to address financial covenant compliance concerns and near-term liquidity needs was disclosed, alongside the belief that uncertainty of sufficient available credit after expiration of the credit facility could “indicat[e] that the amount of time available for improved electricity prices to emerge and be of substantial benefit to the company could be limited.”
Regardless, in the absence of the Blackstone transaction, long-term capital needs will likely need to be fulfilled through restructuring Dynegy’s balance sheet using one or a combination of several options, including issuing equity or equity-linked securities, implementing debt for equity swaps or selling assets at depressed prices – causing Dynegy stockholders to face potential significant dilution and further loss on their investments.
Even if it were to accept Mr. Icahn’s non-binding proposal, Dynegy would be in the same challenging situation as it was before the announcement of the Blackstone transaction (when the stock traded at $2.78 per share) – with one very important difference:
THE ICAHN CREDIT FACILITY COULD PROVIDE MR. ICAHN WITH EFFECTIVE CONTROL OVER DYNEGY’S FUTURE
When, inevitably, Dynegy would need to restructure, extend or replace the Icahn credit facility, Mr. Icahn would be the sole senior secured claimant in our capital structure. The Icahn position would be senior to all common stockholders and senior to all Dynegy bondholders. This could provide Mr. Icahn with effective control over the restructuring of Dynegy. In certain restructuring scenarios, Dynegy stockholders could receive no consideration for their investment in Dynegy. Given that the non-binding Icahn credit facility proposal requires an upfront payment of $20 million (an approximate 33% return on investment for Mr. Icahn), Dynegy stockholders could in effect be paying Mr. Icahn today to take control of Dynegy in approximately 18 months, absent a replacement merger or acquisition to replace the Blackstone transaction.
What is the reason for Mr. Icahn's eleventh hour proposal?
Mr. Icahn could have made his proposal months ago. The Special Meeting of Stockholders to vote on the Blackstone transaction is now three days away. It appears to Dynegy that Mr. Icahn is attempting to derail the Blackstone transaction by making the non-binding Icahn credit facility proposal, which he can withdraw or revoke at any time. Dynegy cannot be sure of Mr. Icahn’s motivations, but Dynegy believes he has made this non-binding proposal in order to gain contingent control of Dynegy. If the binding Blackstone transaction is not approved, there is no guarantee (or reasonable expectation) that any other party will make an offer for Dynegy in excess of the current offer. Virtually every sell-side analyst appears to have concluded that the value Blackstone is offering is superior to the risk of a failed transaction. In addition, the nation’s leading proxy advisory firm, Institutional Shareholder Services ("ISS"), has concluded that absent the transaction with Blackstone, Dynegy stock would be trading at approximately $2.66 per share. Blackstone’s offer represents a 69% premium to this ISS estimate.
If you oppose the Blackstone transaction, you risk not only diminishing stockholder value in the near- to mid-term; you also risk putting Mr. Icahn in a position to make an offer below the current Blackstone offer.
The Dynegy Board of Directors believes the Blackstone transaction is in the best interest of all Dynegy stockholders because it provides immediate, certain and fair value for your shares while reducing the considerable downside risk facing Dynegy if the Blackstone transaction is not approved and completed. Vote FOR the Blackstone transaction by following the directions on the WHITE proxy card today.
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 12,200 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil. For more information, please visit www.dynegy.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements". All statements included or incorporated by reference in this release, other than statements of historical fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate", "estimate", "project", "forecast", "plan", "may", "will", "should", "expect" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following: (i) the timing and anticipated benefits to be achieved through our 2010-2013 company-wide cost savings program; (ii) beliefs and assumptions relating to liquidity, available borrowing capacity and capital resources generally; (iii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which we are, or could become, subject; (iv) beliefs about commodity pricing and generation volumes; (v) anticipated liquidity in the regional power and fuel markets in which we transact, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties; (vi) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (vii) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the potential for a market recovery over the longer term; (viii) the effectiveness of our strategies to capture opportunities presented by changes in commodity prices and to manage our exposure to energy price volatility; (ix) beliefs and assumptions about weather and general economic conditions; (x) beliefs regarding the U.S. economy, its trajectory and its impacts, as well as Dynegy’s stock price; (xi) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xii) beliefs and expectations regarding the Plum Point Project; (xiii) expectations regarding our revolver capacity, credit facility compliance, collateral demands, capital expenditures, interest expense and other payments; (xiv) our focus on safety and our ability to efficiently operate our assets so as to maximize our revenue generating opportunities and operating margins; (xv) beliefs about the outcome of legal, regulatory, administrative and legislative matters; (xvi) expectations and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs; and (xvii) uncertainties associated with the proposed merger of Dynegy and an affiliate of Blackstone (the “Merger”), including uncertainties relating to the anticipated timing of filings and approvals relating to the Merger and the sale by an affiliate of Blackstone of certain assets to NRG Energy, Inc. (the "NRG Sale"), the outcome of legal proceedings that have been or may be instituted against Dynegy and/or others relating to the Merger and/or the NRG Sale, the expected timing of completion of the Merger and the NRG Sale, the satisfaction of the conditions to the consummation of the Merger and the NRG Sale and the ability to complete the Merger and the NRG Sale.
Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, Dynegy filed a definitive proxy statement with the SEC on October 4, 2010, and commenced mailing the definitive proxy statement and form of proxy to the stockholders of Dynegy. BEFORE MAKING ANY VOTING DECISION, DYNEGY'S STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Dynegy’s stockholders are able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. Dynegy’s stockholders are also able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents by directing a request by mail or telephone to Dynegy Inc., Attn: Corporate Secretary, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002, telephone: (713) 507-6400, or from Dynegy’s website, http://www.dynegy.com.
PARTICIPANTS IN THE SOLICITATION
Dynegy and its directors and officers may be deemed to be participants in the solicitation of proxies from Dynegy’s stockholders with respect to the Merger. Information about Dynegy’s directors and executive officers and their ownership of Dynegy’s common stock is set forth in the proxy statement for Dynegy’s 2010 Annual Meeting of Stockholders, which was filed with the SEC on April 2, 2010. Stockholders may obtain additional information regarding the interests of Dynegy and its directors and executive officers in the Merger, which may be different than those of Dynegy’s stockholders generally, by reading the definitive proxy statement filed with the SEC on October 4, 2010 and other relevant documents regarding the Merger when filed with the SEC.
1 Using September 7, 2010 natural gas pricing
Dynegy Issues Open Letter to Stockholders
Dynegy (NYSE:DYN)
Intraday Stock Chart
Today : Monday 8 November 2010
Dynegy Inc. (NYSE: DYN) announced today that it has issued an open letter to stockholders in connection with Dynegy’s November 17, 2010 Special Meeting of Stockholders.
Following is the text of the letter from Bruce A. Williamson, Chairman, President and CEO:
November 8, 2010
Dear Stockholders:
Seneca Capital recently filed definitive proxy materials with the SEC, as well as a slide presentation, to solicit votes against the Blackstone transaction, which offers stockholders a 62% premium to the price at which Dynegy’s shares were trading immediately prior to the transaction announcement on August 13, 2010. Dynegy believes Seneca’s materials contain numerous errors and misleading information.
Dynegy believes Seneca is advocating a reckless strategy of turning down the certainty and cash premium value offered by the Blackstone transaction in the hope that natural gas prices improve dramatically above that which is currently anticipated by the market. Dynegy cautions all stockholders to carefully consider the following about Seneca’s solicitation:
Institutional Shareholder Services (“ISS”), the leading independent proxy advisory firm, reviewed Seneca’s claims and DISAGREED with Seneca’s recommendations and, instead, RECOMMENDED THAT DYNEGY’S STOCKHOLDERS VOTE FOR the Blackstone transaction on the WHITE proxy card today. ISS noted:1
“[F]undamentals seem to have deteriorated since announcement, with the average price for natural gas on the 5-year forward curve having decreased 7.1% and analysts having cut their estimates. Based on the historical relationship with peers and the current consensus 2011 EBITDA estimates, the stock standalone value would be $2.66.” (emphasis added)
Dynegy notes that the Blackstone offer of $4.50 per share in cash represents a 69% premium to this ISS estimated share price.
In addition:
Seneca does not address very real and near-term risks to Dynegy, such as its liquidity, high leverage and refinancing risks;
Seneca claims that the natural gas price cycle is at a bottom, ignoring the increasing supply and continued decline in price, even since the announcement of the Blackstone transaction;
Seneca grossly oversimplifies the timing of the EPA Clean Air rules, disregarding the ongoing, uncertain political process and the likelihood that years will pass before plants are shut down after regulations are put in place;
Seneca does not accurately calculate its Sum-of-the-Parts analysis of Dynegy as a going concern company – including using optimistic asset valuations and excluding environmental capital expenditures. In contrast, Goldman, Sachs & Co. AND Greenhill & Co., LLC both independently determined that Blackstone’s $4.50 per share offer is fair to Dynegy stockholders from a financial point of view;
Seneca’s analysis of Dynegy’s free cash flow is wrong and misleading. It ignores basic cash flows like interest expense, debt service, environmental obligations and lease expense that simply must be paid before cash is available to common stockholders; and
Seneca’s attacks on Dynegy’s Board and management team are not supported by the facts and appear desperate, ill-informed and are reflective of Seneca’s limited understanding of running a public company.
SENECA’S OPPOSITION IS BUILT
ON A FOUNDATION OF MISINFORMATION
Seneca’s solution to Dynegy’s liquidity challenges appears to be for Dynegy to issue more debt: Unfortunately, given that Dynegy is already levered at roughly 10x EBITDA (peer group leverage is approximately 3.5x-6.5x EBITDA), adding more debt is not a practical solution and IT DOES NOT enhance value for stockholders, as Dynegy’s interest and debt service would increase substantially – increasing projected current negative cash flows (which are currently projected at $1.6 billion over the next five years – or over 3x Dynegy’s current market capitalization – using September 7, 2010 pricing). Any new debt Dynegy could issue would be on top of, and likely with maturities prior to, Dynegy’s upcoming 2015 maturities. The bottom line is that additional debt will be difficult to obtain, likely contain covenants that would significantly limit future flexibility and only push out the timing of cash flows available to stockholders.
Seneca claims an improvement in natural gas prices is “in sight”: Seneca appears to ignore the fact that the anticipated timing to realize the upside of the sector has been significantly delayed due to the recession and the significant decline in energy prices driven by the large quantities of gas being developed. Forward natural gas prices have declined steadily over the past two years and have continued to fall (approximately 7%) since the Blackstone transaction was announced. Currently, Dynegy believes that there is no near-term recovery in sight for natural gas prices, and the abundance of gas appears to be a long-term driver of gas prices. No one, including Seneca, knows what future commodity prices will actually be, but forward price curves represent a broad-based, collective market judgment as to the most likely future prices. Seneca provides no substantive basis for why it believes natural gas prices will make a dramatic turnaround beyond that which is currently anticipated by the market. Seneca may be willing to wager on the hope that natural gas prices turn around and, by extension, Dynegy’s cash flow, stock price and future; however, Dynegy believes such a strategy is reckless and not in the best interest of Dynegy and its stockholders.
Seneca grossly oversimplifies the timing of the effects of future environmental regulation, and there is no certainty as to the scope of the regulations themselves: Seneca claims EPA Clean Air rules, which could increase the price of electricity, are “right around the corner.” The reality is that no one, including Seneca, is certain of when or if EPA Clean Air rules will be approved, what form they will ultimately take, and, even after approval, when those rules would be implemented. Seneca’s analysis also ignores the fact that it will likely take years before plants are shut down after any regulations are put in place.
Seneca’s valuation of Dynegy at $6.50 per share today is based on incomplete assumptions and belied by the lack of any acquisition interest other than Blackstone at the $4.50 per share level: Seneca’s Sum-of-the-Parts (“SOTP”) analysis of Dynegy is misleading and contains numerous errors (for example, excluding environmental capital expenditures). After correcting Seneca’s SOTP analysis for its factual errors AND even assuming Seneca’s optimistic asset valuations, that calculation would yield a negative per share value for Dynegy.
Seneca’s analysis of Dynegy’s free cash flow is INCORRECT: What Seneca asserts as Dynegy’s free cash flow available to stockholders disregards interest expense, debt service, including lease expense, and environmental capital expenditures totaling approximately $2.2 billion. These are contractual obligations for Dynegy, NOT discretionary items and they MUST be paid before cash is available or “free” for stockholders. Thus, rather than generating distributable free cash flow as Seneca alleges, Dynegy has projected $1.6 billion of NEGATIVE free cash flow over the next five years using September 7, 2010 pricing. Dynegy believes this misstatement is an attempt by Seneca to mislead investors.
Seneca contends that management has a conflict of interest in advocating for the transaction with Blackstone: In addition to having equity interests in Dynegy that align its interest in maximizing stockholder value with those of Dynegy’s other stockholders, Dynegy’s management currently has no arrangement in place to continue with Dynegy if the Blackstone transaction is completed nor to rollover its equity into the company once it is private. Importantly, if Dynegy were to trade at Seneca’s target price, management’s long-term incentives would yield far greater value than they will on closing of the Blackstone transaction.
Seneca’s attacks on Dynegy’s management appear desperate and ill-informed: While Dynegy management believes that the Blackstone transaction is the best alternative for stockholders, it is the Dynegy Board of Directors, NOT Dynegy’s management, that approved the merger agreement and is recommending Dynegy stockholders vote FOR the proposal to adopt the merger agreement. Dynegy’s management is covered by standard change in control plans that were approved by Dynegy’s Board and have been in place and publicly disclosed for several years, and are consistent with those of similarly situated public companies. The severance provisions of these plans are “double trigger” – that is, they are triggered only if both a change in control and an involuntary or “good reason” termination occur. As described in the definitive proxy statement, Dynegy’s Board, which is comprised of a majority of independent directors, reviewed the potential payments under these plans and concluded they were reasonable and would not affect the advice from, or work performed by, management. Dynegy’s management’s goal has been, and continues to be, maximizing value for all Dynegy stockholders. If Dynegy’s management truly believed that a market recovery is right around the corner, as Seneca suggests, it would have every incentive to advocate continuing Dynegy as a stand-alone company and achieving greater returns on its long-term incentives.
SENECA’S TRADING IN DYNEGY STOCK CONTRADICTS ITS RECENT CLAIMS ABOUT THE VALUE OF DYNEGY
Seneca’s November 5, 2010 slide presentation claims that the current value of Dynegy is $6.50 per share. Yet as recently as the day before the Blackstone transaction was announced, Seneca SOLD approximately 700,000 shares of Dynegy stock at $2.93. Since the announcement of the Blackstone transaction, natural gas prices have declined further causing even more pressure on Dynegy.
SENECA PROVIDES NO SPECIFIC STRATEGIC ALTERNATIVE THAT IS SUPERIOR TO THE BLACKSTONE TRANSACTION
In addition to the errors and misinformation in its November 5, 2010 slide presentation, Seneca offers Dynegy stockholders no strategic plan. Seneca initially filed its complaints against the Blackstone transaction on October 21, 2010 – over two months after the announcement of the transaction. Since then, no Seneca communication – including its most recent slide presentation – has articulated any specific alternative that would deliver value to Dynegy stockholders superior to that contemplated by the Blackstone transaction. Instead, Seneca continues to recommend that Dynegy stockholders turn down the certain cash premium inherent in the Blackstone transaction in favor of a bet on a recovery in natural gas prices beyond that of the forward curve, a liquid market that has billions of dollars of daily trades, as the basis for its position. Furthermore, Seneca’s last minute proposal to appoint two unnamed director nominees and to offer conceptual and vague stockholder resolutions is NOT a strategic plan. Dynegy’s Board is comprised of experienced, dedicated and independent directors, each of whom understands the real near- and medium-term challenges facing Dynegy that cannot be addressed with ambiguous suggestions and potentialities like those put forth by Seneca.
For all of these and the numerous other reasons we have been communicating to you, Dynegy urges stockholders to take Seneca’s slide presentation for what it is worth: a desperate attempt to derail the Blackstone transaction based on hopes and assumptions about future energy prices, the timing of the implementation of Clean Air regulations, and other factors that neither Dynegy nor Seneca control. DO NOT GAMBLE YOUR DYNEGY INVESTMENT ON SENECA’S UNINFORMED GUESSES.
SENECA’S BET ON A DRAMATIC TURNAROUND IN NATURAL GAS PRICES ABOVE THAT ANTICIPATED BY THE MARKET (AND ALREADY EMBEDDED IN THE DYNEGY BOARD’S ANALYSIS IN THEIR RECOMMENDATION OF BLACKSTONE’S 62% PREMIUM OFFER) MAY WORK FOR A COMMODITY TRADER, BUT NOT FOR A PUBLIC COMPANY
Importantly, Seneca’s slide presentation does not even attempt to provide a credible solution to an obvious dilemma – what is the survival path for Dynegy between today’s gas prices, today’s forward natural gas curve, and 2014? 2015? 2016?
Contrary to what Seneca would have you believe, Dynegy faces significant liquidity challenges ($1.6 billion of negative free cash flows currently projected over the next five years using September 7, 2010 pricing), and the downside risks to Dynegy of not obtaining stockholder approval and subsequently completing the transaction with Blackstone are substantial and real. Since the transaction was originally approved by the Dynegy Board on August 12th, natural gas prices have further declined approximately 7%, making it increasingly difficult and more expensive to refinance credit facilities and, without a waiver, these credit facilities would need to be amended, likely with less availability and higher costs. The reality is that if the Blackstone transaction is not approved and subsequently completed, Dynegy, using the latest available commodity price curves, projects potential non-compliance with certain credit facility financial covenants based on forecasted earnings as of June 30, 2011. Absent the Blackstone transaction, Dynegy may be forced to restructure its balance sheet using one or a combination of several options, including issuing equity or equity-linked securities, implementing debt for equity swaps or selling assets at depressed prices – causing Dynegy stockholders to face potential significant dilution and further loss on their investment.
YOUR VOTE IS IMPORTANT –
PLEASE VOTE FOR THE BLACKSTONE TRANSACTION TODAY
Your Board of Directors believes the Blackstone transaction is in the best interest of all Dynegy stockholders because it provides immediate, certain and fair value for your shares while reducing the considerable downside risk facing Dynegy if the Blackstone transaction is not approved and completed. Your Board recommends that stockholders vote FOR the Blackstone transaction on the WHITE proxy card today.
Your vote is extremely important, no matter how many or how few shares you own. Please take a moment to vote FOR the proposal to adopt the merger agreement today – by telephone, by Internet or by signing, dating and returning the WHITE proxy. Please discard any gold proxy cards you receive from Seneca Capital and vote the WHITE proxy card today.
For more information, stockholders are encouraged to read Dynegy’s definitive proxy statement, which was filed with the SEC on October 4, 2010; an Investor Presentation that was filed with the SEC on October 5, 2010 and updates to that Investor Presentation that were filed with the SEC on October 19, 2010, and October 27, 2010, respectively; and letters to stockholders that were filed with the SEC and issued as press releases on October 6, 2010, October 19, 2010, October 26, 2010, and November 2, 2010, respectively.
Thank you for your support.
Sincerely,
/s/ Bruce A. Williamson
Bruce A. Williamson
Chairman, President and CEO
If you have any questions, require assistance in voting your shares, or need
additional copies of Dynegy’s proxy materials, please call MacKenzie Partners at the phone numbers listed below.
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
dynegy@mackenziepartners.com
(212) 929-5500 (call collect)
Or
TOLL-FREE (800) 322-2885
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 12,200 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil. For more information, please visit www.dynegy.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements". All statements included or incorporated by reference in this release, other than statements of historical fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate", "estimate", "project", "forecast", "plan", "may", "will", "should", "expect" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following: (i) the timing and anticipated benefits to be achieved through our 2010-2013 company-wide cost savings program; (ii) beliefs and assumptions relating to liquidity, available borrowing capacity and capital resources generally; (iii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which we are, or could become, subject; (iv) beliefs about commodity pricing and generation volumes; (v) anticipated liquidity in the regional power and fuel markets in which we transact, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties; (vi) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (vii) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the potential for a market recovery over the longer term; (viii) the effectiveness of our strategies to capture opportunities presented by changes in commodity prices and to manage our exposure to energy price volatility; (ix) beliefs and assumptions about weather and general economic conditions; (x) beliefs regarding the U.S. economy, its trajectory and its impacts, as well as Dynegy’s stock price; (xi) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xii) beliefs and expectations regarding the Plum Point Project; (xiii) expectations regarding our revolver capacity, credit facility compliance, collateral demands, capital expenditures, interest expense and other payments; (xiv) our focus on safety and our ability to efficiently operate our assets so as to maximize our revenue generating opportunities and operating margins; (xv) beliefs about the outcome of legal, regulatory, administrative and legislative matters; (xvi) expectations and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs; and (xvii) uncertainties associated with the proposed merger of Dynegy and an affiliate of Blackstone (the “Merger”), including uncertainties relating to the anticipated timing of filings and approvals relating to the Merger and the sale by an affiliate of Blackstone of certain assets to NRG Energy, Inc. (the "NRG Sale"), the outcome of legal proceedings that have been or may be instituted against Dynegy and/or others relating to the Merger and/or the NRG Sale, the expected timing of completion of the Merger and the NRG Sale, the satisfaction of the conditions to the consummation of the Merger and the NRG Sale and the ability to complete the Merger and the NRG Sale.
Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, Dynegy filed a definitive proxy statement with the SEC on October 4, 2010, and commenced mailing the definitive proxy statement and form of proxy to the stockholders of Dynegy. BEFORE MAKING ANY VOTING DECISION, DYNEGY'S STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Dynegy’s stockholders are able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. Dynegy’s stockholders are also able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents by directing a request by mail or telephone to Dynegy Inc., Attn: Corporate Secretary, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002, telephone: (713) 507-6400, or from Dynegy’s website, http://www.dynegy.com.
PARTICIPANTS IN THE SOLICITATION
Dynegy and its directors and officers may be deemed to be participants in the solicitation of proxies from Dynegy’s stockholders with respect to the Merger. Information about Dynegy’s directors and executive officers and their ownership of Dynegy’s common stock is set forth in the proxy statement for Dynegy’s 2010 Annual Meeting of Stockholders, which was filed with the SEC on April 2, 2010. Stockholders may obtain additional information regarding the interests of Dynegy and its directors and executive officers in the Merger, which may be different than those of Dynegy’s stockholders generally, by reading the definitive proxy statement filed with the SEC on October 4, 2010 and other relevant documents regarding the Merger when filed with the SEC.
More news out
Dynegy Inc. (NYSE: DYN) today sent the following letter to its stockholders reiterating the recommendation of the Dynegy Board of Directors that they vote FOR the proposal to adopt the merger agreement with an affiliate of The Blackstone Group L.P. at Dynegy’s November 17, 2010 Special Meeting of Stockholders:
November 2, 2010
Dear Stockholders:
Your Board of Directors believes the Blackstone transaction is in the best interest of all Dynegy stockholders because it provides immediate, certain and fair value for your shares while reducing the considerable downside risk facing Dynegy if the Blackstone transaction is not approved and completed. Your Board recommends that stockholders vote FOR the Blackstone transaction on the enclosed WHITE proxy card today.
As we have previously communicated:
No transaction other than the Blackstone proposal materialized over Dynegy’s two-year evaluation of strategic alternatives;
Despite the broad solicitation of potentially interested parties during the 40-day “go-shop” period, no party made a proposal, much less one that was superior to the Blackstone offer;
Dynegy’s significant leverage and $1.6 billion of forecasted negative free cash flow between 2011 and 20151 create a very challenging liquidity position over time;
There is significant risk to Dynegy associated with a stand-alone strategy and those risks have increased since the announcement of the Blackstone transaction; and
Dynegy’s stock price could fall to or below its pre-announcement stock price of $2.78 per share if the Blackstone transaction is not completed.
THE ANALYSES OF NUMEROUS INDEPENDENT SELL-SIDE ANALYSTS CONSISTENTLY APPEAR TO SUPPORT THE BLACKSTONE TRANSACTION AS THE BEST ALTERNATIVE AVAILABLE FOR DYNEGY STOCKHOLDERS
Numerous independent sell-side financial and credit analysts, who have a deep understanding of the power generation industry and Dynegy’s financial condition, have published research reports that consistently appear to support your Board’s conclusion that the Blackstone transaction is the best alternative available for Dynegy’s stockholders:2
“We believe the [Blackstone] deal will be consummated at the announced bid price since: 1) no better bid came during go shop period, and no parties made bid despite having contacted 40+ firms; 2) Blackstone is hard pressed to improve takeout price given precedent, and; 3) DYN is substantially more distressed than when deal was announced (had a 60% premium to share price at takeout).” – Julien Dumoulin-Smith, UBS, October 25, 2010
“Based on our assessment of these public filings, Dynegy's financial profile is expected to be quite fragile, particularly during 2011 and 2012, when the company is projected to generate both negative operating cash flow and negative free cash flow due to weak operating margins and the required funding of their capital investment programs.” – Moody’s, October 1, 2010
“With the end of the 40-day period during which DYN was allowed to try to find a better offer than the one it currently has with Blackstone for $4.50 per Dynegy share, we are lowering our 12-month target price by $0.50 to the deal price of $4.50 as we do not expect a higher offer. During the period, DYN contacted some 42 parties and signed confidentiality agreements with 8 in an effort to find a better offer. However, no new proposals were made by any of those parties.” – Standard & Poor's Investment Advisory Services LLC, October 9, 2010
“[Another bidder] looking to replicate the NRG deal with another party (NRG is locked in exclusivity), with the fall in Nat Gas prices and the depressed coal and gas units for sale in the market, those assets are unlikely to fetch the $1.36B NRG is paying for them. All said, there are significant financial hurdles for an interloping bid.” – Stephen Grahling, Jefferies & Co., October 5, 2010
Recent comments from NRG Energy, Inc.’s CEO, David Crane, reinforce the viewpoint of certain sell-side analysts regarding the difficulty in replicating the sale of four natural gas-fired assets proposed to be sold to NRG (the “NRG transaction”) concurrently with the closing of the Blackstone transaction:
“We would re-price the transaction and it would re-price in a southward direction. All power plants are basically priced off the forward gas curve and the forward gas curve has gone down since the deal was announced.” – David Crane, Reuters, October 29, 2010
DYNEGY BELIEVES SENECA’S INTERESTS ARE NOT ALIGNED WITH THOSE OF ALL DYNEGY STOCKHOLDERS
In advance of the Special Meeting, Dynegy stockholders should ask themselves the following questions:
Are Seneca’s interests aligned with those of all other Dynegy stockholders?
Dynegy believes they are not. Prior to the announcement of the Blackstone transaction, Seneca owned less than 1% of outstanding Dynegy stock. As recently as the day before the Blackstone transaction was announced, Seneca sold approximately 700,000 shares of Dynegy stock at $2.93. Based on this pre-Blackstone transaction announcement sale, it appears that Seneca very recently viewed $2.93 per share as a fair value for Dynegy. However, since the announcement of the Blackstone transaction Seneca has been a net purchaser of Dynegy stock, predominantly at prices in excess of Blackstone’s $4.50 per share offer. In fact, beginning the day the transaction was announced, Seneca has purchased 62.6 million shares at an average weighted cost of $4.66 per share. All told, Seneca currently owns approximately 9% of Dynegy’s outstanding shares. Perhaps the real question is: Why has Seneca accumulated such a large position – after the transaction was announced – at prices above the offer price?
If Seneca truly believes the Blackstone offer is undervalued, why didn’t it hold the shares it sold at $2.93 or execute a non-disclosure agreement to receive more information about Dynegy and potentially submit a proposal in excess of Blackstone’s offer during the 40-day “go-shop” period?
What is Seneca’s motivation in attempting to defeat the Blackstone transaction?
What is Seneca’s true economic interest in Dynegy?
Simply put, we believe Seneca is looking to advance its own interests at the expense of all other Dynegy stockholders. We further believe Seneca will seek to create value for itself dependent on what actions and what investments will yield it the greatest return, even if such actions or investments are not consistent with the interests of Dynegy’s other equity investors. We know Seneca holds over-the-counter European-style call options, providing the right to purchase 1,986,900 and 904,100 shares of Dynegy common stock, respectively, at an exercise price of $1.00 per share as of January 21, 2011. We do not know what other Dynegy-related securities Seneca might own, including our debt securities and credit default swaps and other complex constructions of hybrid securities. We cannot rule out the possibility that Seneca has structured trades that would create significant additional value for Seneca by capitalizing on and profiting from a failed transaction with Blackstone.
In contrast, Dynegy’s Board is looking after the best interest of Dynegy and ALL its stockholders.
How can Seneca conclude the current offer is unacceptable when they have no specific alternative? Does Seneca have a plan to effectively manage Dynegy on a stand-alone basis?
Seneca offers Dynegy stockholders no strategic plan. Seneca’s SEC filings – including the one it made today – are completely devoid of any alternative by either Seneca or any other party that would deliver immediate value to Dynegy stockholders. Furthermore, Seneca fails to recognize that Dynegy’s Board conducted a thorough review of strategic alternatives over the past TWO years to maximize value for its stockholders. In fact, Seneca’s strategy appears to be solely dependent on the simplistic hope for a dramatic turnaround in natural gas prices. Dynegy’s Board believes it is not in the best interest of Dynegy or its stockholders to predicate a go-forward strategy on the hope that the price of natural gas reverses its current downward trend. Seneca’s recommendations to Dynegy stockholders have demonstrated a lack of experience in managing a public company like Dynegy, especially in a difficult economic environment. Dynegy has obligations to many stakeholders and must sustain itself to deliver value to all of its constituencies. Is risking Dynegy’s stock price and future on the hope that natural gas prices will turnaround to a level well in excess of current market expectations a viable strategy? Hope is not a strategy and that is all Seneca is offering.
Why should Dynegy stockholders vote for the Blackstone transaction?
Despite its restructuring efforts, Dynegy continues to face challenges, many of which are beyond its control, including low and declining commodity prices driven by the large quantities of shale gas being developed in North America and continued economic weakness. Together, these two forces create significant risks and operating limitations for Dynegy’s business, exacerbating Dynegy’s substantial leverage and requiring Dynegy to access capital going forward.
If the Blackstone transaction is not approved and subsequently completed, Dynegy will likely breach its debt covenants by the end of the second quarter of 2011; Dynegy expects $1.6 billion of negative free cash flow between 2011 and 2015 and may be forced to restructure its balance sheet using one or a combination of several options, including issuing equity or equity-linked securities, implementing debt for equity swaps or selling assets at depressed prices. As a result, Dynegy’s stockholders could lose not only the significant and immediate cash value inherent in Blackstone’s premium offer, but could also face potential significant dilution and further loss on their investment as a result of any such subsequent restructuring activities.
YOUR VOTE IS IMPORTANT –
PLEASE VOTE FOR THE BLACKSTONE TRANSACTION TODAY
We have presented you with the facts, now it is time for ALL Dynegy stockholders to act. Your vote is extremely important, no matter how many or how few shares you own. Please take a moment to vote FOR the proposal to adopt the merger agreement today – by telephone, by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Please discard any gold proxy cards you receive from Seneca Capital and vote the WHITE proxy card today.
For more information, please see Dynegy’s definitive proxy statement, which was filed with the SEC on October 4, 2010; an Investor Presentation that was filed with the SEC on October 5, 2010 and updates to that Investor Presentation that were filed with the SEC on October 19, 2010, and October 27, 2010, respectively; and letters to stockholders that were filed with the SEC and issued as press releases on October 6, 2010, October 19, 2010, and October 26, 2010, respectively.
Thank you for your support.
Sincerely,
/s/ Bruce A. Williamson
Bruce A. Williamson
Chairman, President and CEO
If you have any questions, require assistance in voting your shares, or need additional copies of Dynegy’s proxy materials, please call MacKenzie Partners at the phone numbers listed below.
105 Madison Avenue
New York, NY 10016
dynegy@mackenziepartners.com
(212) 929-5500 (call collect)
Or
TOLL-FREE (800) 322-2885
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 12,200 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil. For more information, please visit www.dynegy.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements". All statements included or incorporated by reference in this release, other than statements of historical fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate", "estimate", "project", "forecast", "plan", "may", "will", "should", "expect" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following: (i) the timing and anticipated benefits to be achieved through our 2010-2013 company-wide cost savings program; (ii) beliefs and assumptions relating to liquidity, available borrowing capacity and capital resources generally; (iii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which we are, or could become, subject; (iv) beliefs about commodity pricing and generation volumes; (v) anticipated liquidity in the regional power and fuel markets in which we transact, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties; (vi) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (vii) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the potential for a market recovery over the longer term; (viii) the effectiveness of our strategies to capture opportunities presented by changes in commodity prices and to manage our exposure to energy price volatility; (ix) beliefs and assumptions about weather and general economic conditions; (x) beliefs regarding the U.S. economy, its trajectory and its impacts, as well as Dynegy’s stock price; (xi) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xii) beliefs and expectations regarding the Plum Point Project; (xiii) expectations regarding our revolver capacity, credit facility compliance, collateral demands, capital expenditures, interest expense and other payments; (xiv) our focus on safety and our ability to efficiently operate our assets so as to maximize our revenue generating opportunities and operating margins; (xv) beliefs about the outcome of legal, regulatory, administrative and legislative matters; (xvi) expectations and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs; and (xvii) uncertainties associated with the proposed merger of Dynegy and an affiliate of Blackstone (the “Merger”), including uncertainties relating to the anticipated timing of filings and approvals relating to the Merger and the sale by an affiliate of Blackstone of certain assets to NRG Energy, Inc. (the "NRG Sale"), the outcome of legal proceedings that have been or may be instituted against Dynegy and/or others relating to the Merger and/or the NRG Sale, the expected timing of completion of the Merger and the NRG Sale, the satisfaction of the conditions to the consummation of the Merger and the NRG Sale and the ability to complete the Merger and the NRG Sale.
Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, Dynegy filed a definitive proxy statement with the SEC on October 4, 2010, and commenced mailing the definitive proxy statement and form of proxy to the stockholders of Dynegy. BEFORE MAKING ANY VOTING DECISION, DYNEGY'S STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Dynegy’s stockholders are able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. Dynegy’s stockholders are also able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents by directing a request by mail or telephone to Dynegy Inc., Attn: Corporate Secretary, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002, telephone: (713) 507-6400, or from Dynegy’s website, http://www.dynegy.com.
PARTICIPANTS IN THE SOLICITATION
Dynegy and its directors and officers may be deemed to be participants in the solicitation of proxies from Dynegy’s stockholders with respect to the Merger. Information about Dynegy’s directors and executive officers and their ownership of Dynegy’s common stock is set forth in the proxy statement for Dynegy’s 2010 Annual Meeting of Stockholders, which was filed with the SEC on April 2, 2010. Stockholders may obtain additional information regarding the interests of Dynegy and its directors and executive officers in the Merger, which may be different than those of Dynegy’s stockholders generally, by reading the definitive proxy statement filed with the SEC on October 4, 2010 and other relevant documents regarding the Merger when filed with the SEC.
Dynegy Provides Additional Information in Response to Seneca Filings
Dynegy (NYSE:DYN)
Intraday Stock Chart
Today : Tuesday 26 October 2010
Dynegy Inc. (NYSE: DYN) today sent the following letter to its stockholders reiterating the recommendation of the Dynegy Board of Directors that they vote FOR the proposal to adopt the merger agreement with an affiliate of The Blackstone Group L.P. at Dynegy’s November 17, 2010 Special Meeting of Stockholders:
October 26, 2010
Dear Stockholders:
I am writing to you today to directly respond to points contained in recent Securities and Exchange Commission filings made by a Dynegy stockholder who is saying it opposes the acquisition of Dynegy by an affiliate of The Blackstone Group L.P. for $4.50 per share in cash. As Dynegy’s Special Meeting of Stockholders on November 17, 2010 approaches, it is important that all stockholders understand the facts about their company and the Blackstone transaction when considering, and voting upon, a proposal to adopt the merger agreement with Blackstone.
THE DYNEGY BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT WITH BLACKSTONE
As Dynegy has previously communicated:
No transaction other than the Blackstone proposal materialized over Dynegy’s two-year evaluation of strategic alternatives;
The Board concluded that asset sales would not create stockholder value and that there is significant risk associated with a stand-alone strategy; and
Despite the broad solicitation of potentially interested parties during the 40-day “go-shop” period, no party made a proposal, much less one that was superior to the Blackstone offer.
Your Board believes this transaction is in the best interest of Dynegy’s stockholders because it provides immediate, certain and fair value for your shares while reducing the considerable downside risk facing Dynegy if the Blackstone transaction is not approved and completed. Your Board recommends that stockholders vote FOR the proposal to adopt the merger agreement on the enclosed WHITE proxy card today.
DON’T BE MISLED BY THE MISCONCEPTIONS BEING PROPAGATED BY SENECA CAPITAL
Seneca Capital recently filed preliminary proxy materials with the SEC to solicit proxies against the Blackstone transaction. Dynegy cautions stockholders to carefully consider Seneca’s materials and its underlying motivations.
Seneca may have many reasons to take a risk on a deal that our other stockholders do not have. Dynegy does not know all of Seneca’s interests in this situation. What Dynegy does know is that Seneca has not been a significant long-term holder of Dynegy stock. In fact, Seneca’s public filings showed an ownership position of less than 1% before the Blackstone transaction was announced. Perhaps indicating Seneca’s true beliefs as to Dynegy’s future prospects, Seneca sold approximately 700,000 shares at $2.93 per share on August 12, 2010, the day before Blackstone made its offer public. Blackstone’s offer represents a 54% premium to Seneca's sale of these shares. Clearly Seneca has believed – within the last two and a half months – that $4.50 per share is adequate, as it sold shares of Dynegy stock below that price. Seneca continues to be an active trader in the stock. Just weeks before Seneca came out against the Blackstone transaction, Seneca sold about 500,000 shares of Dynegy stock in one day.
Seneca has purchased the vast majority of its position since the announcement of the Blackstone transaction. Our stockholders should ask themselves about the motivations of Seneca for accumulating such a large position following the announcement of the Blackstone transaction, especially when taking into account Seneca’s sales of Dynegy stock immediately prior to the announcement. For example, while Seneca reported in its Schedule 13D, filed with the SEC on October 7, 2010, that it holds over-the-counter European-style call options, providing the right to purchase 1,986,900 and 904,100 shares of Dynegy common stock, respectively, at an exercise price of $1.00 per share as of January 21, 2011, we do not know what other Dynegy-related securities Seneca might own, including our debt securities and credit default swaps. We also do not know whether Seneca has structured trades that would create additional value for Seneca by capitalizing on and profiting from a failed transaction with Blackstone. Dynegy believes Seneca’s interests are NOT aligned with those of all Dynegy stockholders.
Seneca has made misleading statements with regard to valuing the Blackstone transaction. As an experienced investor, Seneca should be aware that investors in this industry do NOT usually employ percent-of-replacement value as a means of valuing a company. The Blackstone offer of $4.50 per share compares favorably when measured under traditional financial analysis techniques, such as comparable market transactions and discounted cash flow analyses.
SENECA APPEARS TO BE SUPPORTING RECKLESS STRATEGIES THAT ARE NOT IN THE BEST INTEREST OF DYNEGY AND ITS STOCKHOLDERS
Seneca contends that the $4.50 per share merger consideration does not take into account the potential for future higher electricity prices. While Dynegy believes the long-term fundamentals of the energy market remain intact, the anticipated timing to realize the upside of the sector has been significantly delayed due to the recession and the significant decline in energy prices driven by the large quantities of gas being developed. Forward natural gas prices have declined steadily over the past two years and have continued to fall since the Blackstone transaction was announced. Currently, there is no near-term recovery in sight for natural gas prices, and the abundance of gas appears to be a long-term driver of prices. Seneca may be willing to roll the dice on a quick recovery in energy markets; however, Dynegy believes that its current financial position coupled with current commodity prices and forward price curves make such a strategy reckless and contrary to the best interest of Dynegy and its stockholders.
Seneca contends that Dynegy’s stock price underperformed its peers immediately before Dynegy agreed to the Blackstone transaction. What Seneca fails to mention, is that Dynegy conducted a thorough review over the past TWO years to maximize value for its stockholders. Furthermore, Dynegy’s stock price is highly correlated with natural gas prices, which have fallen dramatically over that period and Dynegy’s substantially higher leverage than its peer companies magnifies the sensitivity of Dynegy’s stock price to declining natural gas prices as compared to its peer companies. Seneca fails to take this into account. Seneca also fails to recognize that over the timeframe it referenced in its filings, Dynegy’s total enterprise value fell only 1.7% versus the average of Dynegy’s peer group, which fell 2.6%; Dynegy did not “underperform” its peers during this timeframe. Seneca may be willing to wager on natural gas prices turning around and, by extension, Dynegy’s stock price and future; however, Dynegy believes such a strategy is reckless and not in the best interest of Dynegy and its stockholders.
Seneca contends that Dynegy could pursue a sale of the four natural gas-fired assets proposed to be sold to NRG Energy, Inc. (the “NRG transaction”) on a stand-alone basis, without the Blackstone transaction. Your Board concluded that such a sale would not create stockholder value. In fact, such an asset sale would result in the loss of Dynegy’s existing $1.9 billion credit facility, exacerbating Dynegy’s liquidity challenges. If Dynegy executed the NRG asset sale itself, Dynegy’s projected negative cash flow would increase by approximately $400 million so that the total projected negative cash flow would be $1.5 billion over the next five years. Seneca has not offered Dynegy stockholders any go-forward plan to address these very real and pressing liquidity issues. Seneca may be willing to bet that asset sales are a realistic path to solving Dynegy’s liquidity challenges; however, Dynegy believes such a strategy is reckless and not in the best interest of Dynegy and its stockholders.
SENECA APPEARS TO BE MISREPRESENTING THE FACTS SURROUNDING THE MERGER AGREEMENT WITH BLACKSTONE
Seneca contends that management has a conflict of interest in advocating for the transaction with Blackstone. While Dynegy management believes that the Blackstone transaction is the best alternative for stockholders, it is the Dynegy Board, not the Dynegy management team that approved the merger agreement and is recommending Dynegy stockholders vote FOR the proposal to adopt the merger agreement. Management, in addition to having equity interests in Dynegy that align its interest in maximizing stockholder value with those of Dynegy’s stockholders, currently has no arrangement in place to continue with Dynegy if the Blackstone transaction is completed nor to rollover its equity into the company once it is private. Further, to avoid the appearance of any potential conflict of interest that may attend to a more traditional going private transaction in which management participates, I determined early on that I would not continue with the company if it were acquired by Blackstone. Dynegy’s management does have standard change in control plans that were approved by Dynegy’s Board and have been in place and publicly disclosed for several years, and are consistent with similarly situated public companies’ plans. As described in the definitive proxy statement, Dynegy's Board reviewed the potential payments under these plans and concluded they were reasonable and would not affect the advice from, or work performed by, management.
Seneca also has criticized management for its communications around the consequences of the Blackstone transaction not being approved and subsequently completed. We admit that we have taken an increasingly urgent tone in our materials, and have done so for various important reasons, including:
Commodity prices have deteriorated further since your Board approved the Blackstone transaction, increasing our forecasted negative cash flows through 2015 by nearly 50%.
Misinformation regarding the viability of certain stand-alone strategies – namely, the possibility of a dividend and the ability to create value for stockholders through asset sales – has been propagated through various reports and media channels.
We feel compelled to correct these reports so that you, our stockholders, will have accurate and complete information on which to base your decision regarding the Blackstone transaction.
Seneca contends that a termination fee of $50 million is excessive, implying it hinders another bidder from making an offer for Dynegy. Based on an enterprise value that takes into account Dynegy’s outstanding debt, which is how a potential acquirer would value Dynegy given its substantial leverage, the $50 million post-“go-shop” termination fee translates to 1.1% of total enterprise value, which would not be a hindrance for a potential party interested in acquiring Dynegy. Moreover, what Seneca fails to mention is that prior to entering into the Blackstone transaction, for over TWO years Dynegy, together with its financial advisors, solicited interest from 16 potential acquirers or merger partners. During that period, potential acquirers did not have to take into account any termination fee. Notwithstanding that process, NO transaction other than the Blackstone transaction materialized. Additionally, the Board negotiated a 40-day “go-shop” period with Blackstone during which, and following the announcement of the Blackstone transaction, Dynegy’s financial advisors contacted 42 parties, and Dynegy signed confidentiality agreements with eight parties. Seneca had the ability to make an offer during the 40-day “go-shop” and did not submit a bid, let alone sign a confidentiality agreement. During the “go-shop” period, the termination fee represented only 0.5% of total enterprise value. Despite the broad solicitation of potentially interested parties, no party made a proposal, much less one that was superior to the Blackstone offer.
IF THE BLACKSTONE TRANSACTION IS NOT APPROVED,
DYNEGY’S STOCK PRICE COULD TRADE AT OR BELOW
THE PRE-ANNOUNCEMENT STOCK PRICE OF $2.78 PER SHARE
Contrary to what Seneca would have you believe, the downside risks to Dynegy of not obtaining stockholder approval and subsequently completing the transaction with Blackstone are significant and real. Since August, when the Dynegy Board reached its conclusion that the risks associated with an independent strategy outweigh the potential benefits of continuing as a stand-alone company, those risks have only increased. Most significantly, commodity prices have continued to deteriorate. Using September commodity pricing, Dynegy’s total projected negative cash flow has increased from the $1.1 billion using June commodity pricing to $1.6 billion over the next five years.
If the Blackstone transaction is not approved by stockholders at the upcoming Special Meeting and subsequently completed, Dynegy may be forced to restructure using one or a combination of several options, including issuing equity or equity-linked securities or selling assets. As a result, Dynegy’s stockholders could lose not only the significant and immediate cash value inherent in Blackstone’s premium offer, but could also face potential dilution and further loss on their investment as a result of any such subsequent restructuring activities.
In this scenario, Dynegy’s stock could trade at or below its pre-announcement stock price of $2.78 per share. Natural gas prices have fallen approximately 7% and the stock prices of Dynegy’s peers have fallen on average approximately 2% since August 12, 2010, the day before the announcement of the Blackstone transaction – which could imply a 65% loss in value when compared to Blackstone’s binding cash offer of $4.50 per share.
In contrast, Dynegy believes Blackstone’s cash offer of $4.50 per share provides Dynegy stockholders with full, fair and immediate value and is in the best interest of Dynegy and its stockholders.
YOUR VOTE IS IMPORTANT –
PLEASE VOTE FOR THE BLACKSTONE TRANSACTION TODAY
Your vote is extremely important, no matter how many or how few shares you own. The affirmative vote of holders of a majority of Dynegy’s outstanding shares is required to approve the proposal to adopt the merger agreement. Failing to vote has the same effect as a vote against the proposal to adopt the merger agreement. Please take a moment to vote FOR the proposal to adopt the merger agreement today – by telephone, by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Please discard any gold proxy cards you receive from Seneca Capital and vote the WHITE proxy card today.
For more information, please see Dynegy’s definitive proxy statement, which was filed with the SEC on October 4, 2010; an Investor Presentation that was filed with the SEC on October 5, 2010 and an update to that Investor Presentation that was filed with the SEC on October 19, 2010; and letters to stockholders that were filed with the SEC and issued as press releases on October 6, 2010 and October 19, 2010, respectively. Dynegy urges all Dynegy stockholders to review the definitive proxy statement and other materials as they contain important detailed information about the merger agreement and the reasons why Dynegy’s Board approved the merger agreement.
If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, Inc., Dynegy’s proxy solicitor, by calling toll-free at (800) 322-2885 or (212) 929-5500 (call collect) or by e-mailing dynegy@mackenziepartners.com.
Thank you for your support.
Sincerely,
/s/ Bruce A. Williamson
Bruce A. Williamson
Chairman, President and CEO
If you have any questions, require assistance in voting your shares, or need
additional copies of Dynegy’s proxy materials, please call MacKenzie Partners at the phone numbers listed below.
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
dynegy@mackenziepartners.com
(212) 929-5500 (call collect)
Or
TOLL-FREE (800) 322-2885
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 12,200 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil. For more information, please visit www.dynegy.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements". All statements included or incorporated by reference in this release, other than statements of historical fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate", "estimate", "project", "forecast", "plan", "may", "will", "should", "expect" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following: (i) the timing and anticipated benefits to be achieved through our 2010-2013 company-wide cost savings program; (ii) beliefs and assumptions relating to liquidity, available borrowing capacity and capital resources generally; (iii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which we are, or could become, subject; (iv) beliefs about commodity pricing and generation volumes; (v) anticipated liquidity in the regional power and fuel markets in which we transact, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties; (vi) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (vii) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the potential for a market recovery over the longer term; (viii) the effectiveness of our strategies to capture opportunities presented by changes in commodity prices and to manage our exposure to energy price volatility; (ix) beliefs and assumptions about weather and general economic conditions; (x) beliefs regarding the U.S. economy, its trajectory and its impacts, as well as Dynegy’s stock price; (xi) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xii) beliefs and expectations regarding the Plum Point Project; (xiii) expectations regarding our revolver capacity, credit facility compliance, collateral demands, capital expenditures, interest expense and other payments; (xiv) our focus on safety and our ability to efficiently operate our assets so as to maximize our revenue generating opportunities and operating margins; (xv) beliefs about the outcome of legal, regulatory, administrative and legislative matters; (xvi) expectations and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs; and (xvii) uncertainties associated with the proposed merger of Dynegy and an affiliate of Blackstone (the “Merger”), including uncertainties relating to the anticipated timing of filings and approvals relating to the Merger and the sale by an affiliate of Blackstone of certain assets to NRG Energy, Inc. (the "NRG Sale"), the outcome of legal proceedings that have been or may be instituted against Dynegy and/or others relating to the Merger and/or the NRG Sale, the expected timing of completion of the Merger and the NRG Sale, the satisfaction of the conditions to the consummation of the Merger and the NRG Sale and the ability to complete the Merger and the NRG Sale.
Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the Merger, Dynegy filed a definitive proxy statement with the SEC on October 4, 2010, and commenced mailing the definitive proxy statement and form of proxy to the stockholders of Dynegy. BEFORE MAKING ANY VOTING DECISION, DYNEGY'S STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Dynegy’s stockholders are able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. Dynegy’s stockholders are also able to obtain, without charge, a copy of the definitive proxy statement and other relevant documents by directing a request by mail or telephone to Dynegy Inc., Attn: Corporate Secretary, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002, telephone: (713) 507-6400, or from Dynegy’s website, http://www.dynegy.com.
PARTICIPANTS IN THE SOLICITATION
Dynegy and its directors and officers may be deemed to be participants in the solicitation of proxies from Dynegy’s stockholders with respect to the Merger. Information about Dynegy’s directors and executive officers and their ownership of Dynegy’s common stock is set forth in the proxy statement for Dynegy’s 2010 Annual Meeting of Stockholders, which was filed with the SEC on April 2, 2010. Stockholders may obtain additional information regarding the interests of Dynegy and its directors and executive officers in the Merger, which may be different than those of Dynegy’s stockholders generally, by reading the definitive proxy statement filed with the SEC on October 4, 2010 and other relevant documents regarding the Merger when filed with the SEC.
Dynegy to Announce Third Quarter 2010 Results on November 8
The nice thing about this company is the cash on hand and the continuing funding. Pricing the company's stock at about 1.36 to 1.46. That is what I'm using for my downside risk.
Got in this one on Friday. I think its bottoming. Like that insiders bought 400k shares in April and another 400k shares in August. At higher prices than it is today.
I got out today at .0002 only a million shares; but if you ask me its a dog. Make your tick and get out. Don't get cought holding the doggy bag. Good Luck with EYSM.
Small Doubble top put in @ 1.77 on Sep. 23 & 24.
Would like to see ARNA fill the gap @ 3.38; but will take profits @ 2.37. Enjoy the ride.
GN ACC.
Yes, but the tribe thinks he's a weak player for being so old. Anyway he's gone. The show will lose veiwers.
ACC: I'm fine. Jimmy was to much of a leader and voted him off. The host thought they are nuts for voting him off and thinks they justed destoryed their tribe.
Jimmy Johnson was voted off.
Dynegy Inc. Announces End of “Go-Shop” Period
Dynegy (NYSE:DYN)
Intraday Stock Chart
Today : Thursday 23 September 2010
Dynegy Inc. (NYSE: DYN) today announced the expiration of the 40-day “go-shop” period during which Goldman, Sachs & Co. and Greenhill & Co., LLC, acting on Dynegy’s behalf as its financial advisors, solicited alternative proposals to the previously announced merger agreement, dated as of August 13, 2010, which contemplates the acquisition of Dynegy by Denali Parent Inc., an affiliate of The Blackstone Group L.P. (NYSE: BX).
During the “go-shop” period that ended at 11:59 p.m. (Eastern Time) on September 22, 2010, Dynegy’s financial advisors contacted 42 parties to determine whether they would be interested in exploring a transaction with Dynegy that would be superior to the proposed acquisition. Of the 42 parties contacted, eight entered into confidentiality agreements with Dynegy and were provided with access to certain non-public information regarding Dynegy. Despite this broad solicitation of interest, Dynegy did not receive any acquisition proposals during the “go-shop” period.
Dynegy has scheduled a special meeting of stockholders for November 17, 2010, to approve the merger agreement and expects the transaction to close by the end of November 2010.
About Dynegy Inc.
Through its subsidiaries, Dynegy Inc. produces and sells electric energy, capacity and ancillary services in key U.S. markets. The power generation portfolio consists of approximately 12,200 megawatts of baseload, intermediate and peaking power plants fueled by a mix of natural gas, coal and fuel oil. For more information, please visit www.dynegy.com.
About The Blackstone Group L.P.
Blackstone is one of the world’s leading investment and advisory firms. Its alternative asset management businesses include the management of private equity funds, real estate funds, hedge funds, credit-oriented funds, collateralized loan obligation vehicles (CLOs) and closed-end mutual funds. The Blackstone Group also provides various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements”. All statements included or incorporated by reference in this release, other than statements of historical fact, that address activities, events or developments that we or our management expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements represent our reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate”, “estimate”, “project”, “forecast”, “plan”, “may”, “will”, “should”, “expect” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following: (i) the timing and anticipated benefits to be achieved through our 2010-2013 company-wide cost savings program; (ii) beliefs and assumptions relating to liquidity, available borrowing capacity and capital resources generally; (iii) expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion byproducts, and other laws and regulations to which we are, or could become, subject; (iv) beliefs about commodity pricing and generation volumes; (v) anticipated liquidity in the regional power and fuel markets in which we transact, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties; (vi) sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof; (vii) beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the anticipation of a market recovery over the longer term; (viii) the effectiveness of our strategies to capture opportunities presented by changes in commodity prices and to manage our exposure to energy price volatility; (ix) beliefs and assumptions about weather and general economic conditions; (x) beliefs regarding the U.S. economy, its trajectory and its impacts; (xi) projected operating or financial results, including anticipated cash flows from operations, revenues and profitability; (xii) beliefs and expectations regarding the Plum Point Project; (xiii) expectations regarding our revolver capacity, credit facility compliance, collateral demands, capital expenditures, interest expense and other payments; (xiv) our focus on safety and our ability to efficiently operate our assets so as to maximize our revenue generating opportunities and operating margins; (xv) beliefs about the outcome of legal, regulatory, administrative and legislative matters; (xvi) expectations and estimates regarding capital and maintenance expenditures, including the Midwest Consent Decree and its associated costs; and (xvii) uncertainties associated with the proposed transaction between Dynegy and an affiliate of Blackstone Capital Partners V L.P. (“BCP”), including uncertainties relating to the anticipated timing of filings and approvals relating to the proposed transaction and the sale by an affiliate of BCP of certain assets to NRG Energy, Inc. (the “NRG Sale”), the outcome of legal proceedings that have been or may be instituted against Dynegy and/or others relating to the merger agreement and/or the NRG Sale, the expected timing of completion of the proposed transaction, the satisfaction of the conditions to the consummation of the proposed transaction with an affiliate of BCP and the NRG Sale and the ability to complete the proposed transaction. Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, many of which are beyond our control.
WHERE YOU CAN FIND MORE INFORMATION
In connection with the proposed merger of Dynegy with an affiliate of BCP (the “Merger”), Dynegy filed a preliminary proxy statement with the Securities and Exchange Commission (the “SEC”) on September 3, 2010. When completed, a definitive proxy statement and a form of proxy will be mailed to the stockholders of Dynegy. BEFORE MAKING ANY VOTING DECISION, DYNEGY’S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS ENTIRETY BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Dynegy’s stockholders will be able to obtain, without charge, a copy of the preliminary proxy statement, the definitive proxy statement (when available) and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. Dynegy’s stockholders will also be able to obtain, without charge, a copy of the preliminary proxy statement, the definitive proxy statement (when available) and other relevant documents by directing a request by mail or telephone to Dynegy Inc., Attn: Corporate Secretary, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002, telephone: (713) 507-6400, or from the company’s website, http://www.dynegy.com.
PARTICIPANTS IN THE SOLICITATION
Dynegy and its directors and officers may be deemed to be participants in the solicitation of proxies from Dynegy’s stockholders with respect to the Merger. Information about the company’s directors and executive officers and their ownership of the company’s common stock is set forth in the proxy statement for the company’s 2010 Annual Meeting of Stockholders, which was filed with the SEC on April 2, 2010. Stockholders may obtain additional information regarding the interests of the company and its directors and executive officers in the Merger, which may be different than those of the company’s stockholders generally, by reading the preliminary proxy statement, the definitive proxy statement (when available) and other relevant documents regarding the Merger, when filed with the SEC.
More news out on merger plans
Hey ACC, I like vacation, Just sit back, maybe till the New Year. The market will be here when you get back. However, you must check in with Gail and her ihub friends.
ACC - On February 27, 2001, the SEC approved rule changes proposed by the NYSE and FINRA (NASD) aimed at imposing more stringent margin requirements for day trading customers. Under these rules, customers who are deemed "pattern day traders" must have at least $25,000 in their accounts and can only trade in margin accounts.
I got hit with it in March of 2001 and then in 2004. Now I don't have that problem.
The rule applies to anyone who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period. A pattern day trader is subject to special rules. The main rule is that in order to engage in pattern day trading you must maintain an equity balance of at least $25,000 in a margin account. Like I said in the PM sell it all and move the cash to a new account.
WOW, Gail is back as MOD. So GOD did answer my prayers. Glad she's back on her feet. Best of trading guys.