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Dynegy Won't Drop 'Poison Pill' Plan

Dynegy rejected a request by Seneca Capital to shed its 'poison pill' plan the same day that billionaire investor Carl Icahn extended his offer for the company.

HOUSTON (AP) -- Dynegy Inc. rejected a request by major shareholder Seneca Capital to shed its "poison pill" plan Wednesday, the same day that billionaire investor Carl Icahn extended his tender offer for the energy producer.

Seneca claimed that holders of more than 95 percent of Dynegy's outstanding stock decided against tendering their shares and said it was "not surprised."

Last month Dynegy's board agreed to accept a takeover offer for approximately $665 million, or $5.50 per share, from funds affiliated with billionaire investor Carl Icahn's Icahn Investment Enterprises LP.

Icahn is Dynegy's biggest shareholder, controlling 12 million shares, about 10 percent of shares outstanding.

Seneca, which owns 9.3 percent of Dynegy's shares, has opposed Icahn's buyout bid for Dynegy and advised the energy company's shareholders on Friday not to tender shares in the proposed deal.

In a letter sent to Seneca on Wednesday, Dynegy Lead Director Patricia A. Hammick said that getting rid of the poison pill would allow Seneca and unidentified investors to work together to potentially gain control of the Houston company without paying shareholders a premium.

A poison pill, or shareholder rights plan, is enacted to ward off hostile takeovers by putting into motion defensive measures when a single investor garners ownership of a predetermined number of shares.

Hammick said Seneca had every opportunity to acquire Dynegy either on its own or with others, but did not provide a competing offer to Icahn's.

Parties were allowed to submit competing offers to Dynegy, but the company announced on Tuesday that it didn't receive any new takeover bids before the Monday deadline.

Icahn's tender offer for Dynegy was to expire Tuesday, but was extended until Feb. 9 to allow time for Federal Energy Regulatory Commission approval. The deal has been cleared by all other necessary regulators.

Dynegy's shareholders also get to vote on the offer.

About 5.4 million shares, or about 4.4 percent of Dynegy's outstanding stock, had been tendered as of Tuesday.

Icahn and Dynegy's other shareholders had previously rejected The Blackstone Group L.P.'s offer to buy the company for $5 per share.

Despite the board's recommendation in favor of Icahn's offer of $5.50 a share, some shareholders have resisted and shares have traded above the offered price. Dynegy closed at $5.73 on Tuesday. Its stock gained 15 cents, or 2.6 percent, to $5.88 in afternoon trading on Wednesday.

Seneca has said Dynegy is worth $6 to $7 a share and its value could rise to $16 to $18 a share as the economy recovers. But on Wednesday Seneca said it would be opposed to selling Dynegy at $6 a share.

The company said it continues to recommend Dynegy shareholders not tender their shares in the offer and remains in pursuit of a consent solicitation to protect shareholder value by replacing Dynegy Chairman Bruce Williamson and an unnamed board member with railroad executive Hunter Harrison and power industry veteran Jeff Hunter.

Dynegy owns power plants that burn natural gas, coal and oil. It sells electric energy and related services to grids and utilities in the Midwest, the Northeast and the West.

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