Newco and Karl W. Miller have reduced their investment in Dynegy and in informal discussions with other qualified shareholders advised they follow due to lack of clarity on Dynegy's future management team, board of directors and lack of a credible business plan to grow the Company. Dynegy management and Board have made it clear that they are digging in for a fight to the finish and will not bend to Seneca and Icahn motions for them to resign, despite overwhelming shareholder rejection of the Blackstone bid.
Mr. Miller believes Dynegy does have substantial value and stands behind his market call well before JP Morgan and others issued upgrades; the common stock could quickly recover above $10/per share, under the proper circumstances.
Mr. Miller has supported Dynegy shareholders to reject the Blackstone bid and brought a large amount of shareholders across the line on the basis of promptly changing management and the board, instituting an earnings accretive business plan and growing the Company.
Mr. Miller made clear from the beginning of his involvement, he would support shareholders to reject the Blackstone Bid on the basis that the Company would not be broken up or liquidated and made clear he would take no part in any attempt to do either. In short, Mr. Miller put his professional reputation and credentials on the line with major capital and shareholders on this position.
Mr. Miller has not seen any form of an executable business plan to grow Dynegy from major shareholders and is receiving signals that some major shareholders may wish to break the Company apart. Mr. Miller's view is that this will not be accretive to shareholders, as any potential buyers sense blood in the water and will not pay a reasonable price for any of Dynegy's assets (cite NRG CEO David Crane public statement that NRG would submit a lower bid, if at all).
That leaves shareholders with two credible options; insert a senior executive management team into Dynegy very quickly by gaining control of the Board to include a new CEO, COO, and CFO or attempt an outright cash sale, which Mr. Miller believes must be north of $6/share to gain any potential traction with shareholders, and even that price would be selling the company at a discount. There may be a White Knight circling, but again, lack of clarity is the issue and capital preservation is paramount for shareholders.
Regarding the second and more credible option to grow Dynegy, any new CEO must be dynamic, be a senior rainmaker and be able to execute new earnings accretive business plan, as Dynegy is falling apart from the inside out; employee morale is at an all time low and no new transactions have been done for several years.
Dynegy is essentially a dead public company at the current time in Mr. Miller’s opinion. The new CEO must also be able to attract new co-investment capital to fund new acquisitions and grow Dynegy. Seneca has already stated publicly that their proposed Director nominees are not considerations for CEO or any other managerial role.
Therefore, due to the pending protracted fight between Dynegy management/board and Seneca/Icahn and other shareholders, lack of a bona fide business plan, lack of proposed new CEO, COO, and CFO, potential attempts to liquidate/break up Company, and deteriorating internal situation at the Company due to a paralyzed and apathetic management and board, Newco and Mr. Miller are pulling back and recommend shareholders follow their lead take the same protective measures.
Mr. Miller would also like to clarify certain information reported by the media. Mr. Miller made clear to Dynegy shareholders and in public statements that he would consider taking a board or senior management position under appropriate terms and conditions, and with majority consent of Dynegy shareholders to facilitate turning Dynegy around and growing the Company.
Mr. Miller's first priority is to generate a return on capital invested in Dynegy, preserve capital and as he has not seen any leadership to create future value through growth, in addition to the value of current assets net of debt, he advised shareholders he would step up and help.
The appropriate terms and conditions have not been established and contrary to market speculation and press reports by various media, Mr. Miller is not disappointed that he is not currently running Dynegy or on the Board of Directors. Even if Mr. Miller were Dynegy's CEO today, the environment required for Mr. Miller to grow the company does not exist, due to the obstructionist behavior of the current board and certain shareholders.
Mr. Miller would require a significant clean out of the current board or if the current board continues entrenchment, increasing the current board numbers to at least 9 independent directors to insure new control of Dynegy to consider becoming affiliated as an officer and/or director of Dynegy, and putting his name to the company and attracting growth capital. Mr. Miller believes he has given shareholders a fighting chance to turn the Company around by leading shareholders in the defeat of the Blackstone bid.
Speaking for certain shareholders, it is truly disappointing to see the current board and management entrench themselves, waste significant shareholder money on more consultants and obscure strategic analysis which they have spent the past 8 years doing. It is equally disappointing to see certain large shareholders fail to follow shareholder guidance that to gain any acceptance they must put a comprehensive business plan on the table, name their proposed CEO, COO, CFO in addition to proposed directors, who may or may not be acceptable to shareholders.
Mr. Miller does not believe Dynegy can be partially restructured, it must be completely restructured to facilitate growth and it must be done quickly. Attempting to appease Seneca with 1 board seat will not work in Mr. Miller’s opinion. All shareholders want equal representation in the form of a new board and management team, not tied specifically to Seneca, Icahn or any concentrated shareholder group.
Newco and Mr. Miller may re-engage and recommend other investors follow if and when clarity and transparency of key matters referenced above are rectified. Until that time, Newco and Mr. Miller regard any capital tied up in Dynegy as dead capital.
As Mr. Miller said at the beginning of the process, shareholders want to make money and be inspired by dynamic and credible management who can execute new business and attract new capital for growth. That is not the case at Dynegy at the current time.