Mirant, Dynegy Caution Holders on Main Street Offer (Update1)
By Jim Kennett
Atlanta, Sept. 4 (Bloomberg) -- Mirant Corp. and Dynegy Inc., two energy traders whose shares have tumbled this year, told shareholders that a California investment group's tender offer for their stock could be risky.
Main Street AC Inc. offered yesterday to buy up to 4.9 percent of both Mirant and Dynegy at $4.97 and $2.88 a share, respectively. Those prices are premiums of more than 30 percent to the stocks' closing prices Wednesday. San Diego-based Main Street also offered to buy stakes in traders Reliant Resources Inc. and Aquila Inc.
Mirant urged investors to reject the offer. Those who tender their shares risk locking up the stock with Main Street, which in turn can indefinitely postpone acquiring the stakes, the company said in a statement.
``This has the effect of binding the shareholder to sell the tendered stock to Main Street,'' Mirant said.
Dynegy urged in a statement that shareholders use ``extreme caution.'' Such tenders, by offering to buy less than 5 percent of a stock, avoid many of the U.S. Security and Exchange Commission's disclosure requirements, it said.
Shares of the energy companies have plunged this year as trading collapsed, power prices fell and regulators opened investigations into the industry's accounting and trading practices. Dynegy shares have dropped 91 percent, and Mirant has fallen 79 percent.
`100 Percent Committed'
Chester Billingsley, Main Street's president, acknowledged in an interview yesterday that such offers can be ``scams'' intended to catch the unwary. ``In our case, we are offering at a premium,'' Billingsley said. `` We can't withdraw if the price goes down, and we commit 100 percent of the funds to those shares.''
Main Street has said it intends to raise $170 million for the purchases. Spokespeople for Reliant and Aquila said their companies are evaluating the proposals.
Shares of Atlanta-based Mirant fell 10 cents to $3.38 in New York Stock Exchange composite trading. Dynegy rose 13 cents to $2.17.
AI
