Dynergy (DYN) shares are sharply higher this morning after the power company announced a deal to sell a group of power plants to LS Power in exchange for $1.025 billion in cash and 245 million of its Class B shares held by LS Power. The transaction will eliminate Dynegy’s dual-class share structure. Dynegy said the deal will be immediately accretive to adjusted EBITDA, enhance the company’s liquidity and position it to reduce near-term debt maturities.
The agreement also calls for LS Power to receive $235 million in 7.5% unsecured noted due 2015. The deal is expected to close in the second half of 2009. Following the closing of the deal, the 95 million remaining Class B shares held by LS Power will be converted to Class A shares representing about a 15% stake in Dynegy. Under the deal, LS Power is restricted from increasing its stake, and gives up board representation.
In addition, the power company announced a new plan to cut $400 million to $450 million in costs over a four-year period beginning in 2010. Costs will be reduced by cutting capital spending, trimming operational expenses and lowering general and administrative expenses. The program will include an unspecified number of job cuts.
DYN today is up 21 cents, or 10.9%, to $2.14.
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