Blackstone in $4.7bn deal for US energy giant Dynegy

Dynegy has a history of private equity transactions, including a $2.35bn deal in 2005 in which Warburg Pincus took over one of its subsidiaries.

The Blackstone Group is powering up its portfolio with the $4.7 billion acquisition of US energy giant Dynegy.

Dynegy stockholders will receive $4.50 per share in cash, a premium of 62 percent to Thursday’s closing price. Dynegy shareholders have to approve the deal, and the company is permitted to solicit alternative proposals for 40 days. The deal is expected to close by the end of 2010.

As part of the transaction, NRG Energy has agreed to buy four natural gas-fired assets owned by Dynegy for $1.36 billion in cash. The closing of Blackstone’s Dynegy acquisition is contingent on the closing of the deal with NRG Energy, Dynegy said in a statement.

Dynegy produces and sells electricity, capacity and other services in the US. The company has a history of private equity transactions.

Last year, LS Power Associates, a private equity firm, acquired a 15 percent stake in Dynegy, as well as eight power plants, for $1.025 billion. The deal happened months after the two sides unwound a joint venture launched in 2006 that would have backed the development of energy projects.

In 2005, Warburg Pincus paid $2.35 billion for Dynegy subsidiary Dynegy Midstream Services.

Dynegy briefly considered buying Enron in 2001 when that company was sliding toward bankruptcy, but eventually backed away from a deal.

Blackstone and NRG Energy have done business in the past. The US energy company paid $8.3 billion for Texas Genco a year after Blackstone, Hellman & Friedman, Kohlberg Kravis Roberts and TPG bought the company for $3.6 billion.

Goldman Sachs and Greenhill worked as financial advisors to Dynegy, while Credit Suisse and Blackstone Advisory Partners advised Blackstone.