Icahn offers credit to Dynegy, opposes Blackstone’s takeover bid

Billionaire investor Carl Icahn said he would vote against Blackstone Group’s proposal to buy Dynegy Inc. and would offer a $2-billion line of credit to the struggling power company.

Icahn and hedge fund Seneca Capital, Dynegy’s two largest shareholders, believe the private equity firm’s $543-million bid for the company is too low, threatening the deal. Seneca has argued that the company would have more value on its own, but Dynegy has said it could face dire financial problems.

“The Icahn companies, which have billions of dollars of liquidity, will today contact management to make available a $2 billion line of credit if Dynegy management cannot obtain other financing,” Icahn said in a regulatory filing.

Icahn also said he had acquired call options that would enable him to raise his stake in Dynegy to 12.9%. In October, he held nearly 10%.

Dynegy shares rose 6 cents to $4.69 on Friday, about 4% above Blackstone’s takeover offer of $4.50 a share.

The loan offer comes after Dynegy said it would face severe financial hardship if shareholders voted down the Blackstone offer. The deal, worth $4.7 billion including debt, is up for shareholder approval at a meeting scheduled for Wednesday.

Icahn voiced opposition to the Blackstone deal in October but had been quiet since. Meanwhile, Seneca has launched a campaign against the Blackstone deal and plans to nominate two directors to Dynegy’s board. Seneca owns a 9.29% stake in Dynegy.

The power company has defended its deal, saying that market conditions have deteriorated since Blackstone’s offer because of low and declining commodity prices, continued economic weakness and its own challenging financial position.

Dynegy said the credit line wouldn’t help because the company was already over-leveraged compared with its peers.

“We believe adding more debt is not a step that results in greater stockholder value,” spokesman David Byford said in a statement.