Dynegy (DYN) Deal with Icahn Rejected, CEO Stepping Down

Dynegy Inc. (NYSE:DYN) said its chairman and CEO is stepping down and its directors will be replaced as an agreement to be acquired by billionaire investor Carl Icahn was terminated.

The shake-up is at least a partial victory for Seneca Capital, one of Dynegy's biggest shareholders. Seneca had sought to replace Chairman Bruce Williamson and opposed Icahn's $665 million offer. That offer expired Friday afternoon, failing to get sufficient support from shareholders.

Williamson will resign as a director and chairman effective immediately. He will step down as CEO and president on March 11. At that time, David Biegler, an independent director, will take over those roles on an interim basis. Patricia Hammick, previously lead director, will serve as chairman.

In addition, Holli Nichols will step down as Dynegy's chief financial officer and executive vice president, also effective March 11. Charles C. Cook, executive vice president, commercial operations and market analytics, will serve as interim CFO.

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Chesapeake Energy (NYSE:CHK) Up on Icahn Stake

Chesapeake Energy (NYSE:CHK) garnered some news today on the announcement billionaire Carl Icahn now holds a stake of 5.8 percent in the company.

Senior vice president of investor relations, Jeff Mobley, confirmed the numbers and said Icahn is now one of the largest shareholders in the company.

"We have met with Carl on several occasions, as recently as Friday afternoon," said Mobley. "We believe his investment is evidence of his appreciation for our asset quality and for the strategic direction of the company."

This drove up the share price of Chesapeake and made the the top trading component of the S&P 500 early in the trading session.

Chesapeake was trading at $24.86, up $1.56, or 6.70 percent, as of 12:38 PM EST. Volume was just under 20 million as of this writing.

Dynegy (NYSE:DYN) Approves Icahn's Bid

The 10 percent premium offered for Dynegy (NYSE:DYN) by Carl Icahn over Blackstone's (NYSE:BX) bid was enough to push Dynegy to accept the offer.

Icahn upped the bid for Dynegy from the $5 a share Blackstone offered to $5.50.

The values Dynegy as about $665 million, which would be an all-cash deal.

A subsidiary of Icahn Enterprises (NYSE:IEP) will make the tender offer on December 22.

If any better offers are made for Dynegy, the company will consider them through January 24, 2011.

Assuming no other offers, the deal is expected to close sometime in the first quarter of 2011.