By Michael Erman
NEW YORK (Reuters) - Dynegy Inc
The stock closed at $6.01 on the New York Stock Exchange, 51 cents above Icahn Enterprises LP's
"It certainly looks as though the deal is dead in the water," said Gordon Howald, power analyst with East Shore Partners. "The stock looks like its closing at around $6, which was already preemptively denied by Seneca."
Icahn said on Monday that the current extension of his offer for Dynegy would be his last.
If he is unable to convince 35 percent of the company's shareholders to tender their shares into the deal by 5 p.m. Eastern Time, he said he would walk away from the deal. It is not yet known when Icahn or Dynegy will release the results of the tender offer.
Only 1.4 percent of Dynegy shares had been tendered in to the deal as of last week.
Dynegy has already had one attempt to sell itself scuttled. Investors voted down a deal the company had reached with private equity firm Blackstone Group
In that deal, Blackstone originally offered Dynegy shareholders $4.50-a-share and bumped its bid up to $5 a share at the last minute.
Icahn and Dynegy reached their deal in December. But Seneca remained opposed to the sale, arguing that Dynegy's management has consistently undervalued the company, which the hedge fund believes is currently worth $7.50 to $8.50 a share.
Dynegy, which sells power at competitive rates into the open market, has tried to sell itself in the face of weak natural gas prices, which often dictate power prices.
Natural gas oversupply -- driven by new production from U.S. shale formations -- has driven down the value of the fuel and is expected by many to keep prices low for years to come.
Dynegy has argued it is facing serious risks if it remains a stand-alone company, saying that weak market conditions could force the power company into a liquidity crisis if the deal was not completed.
"Given Dynegy's cash flow position, we believe there are serious questions as to whether Dynegy will have sufficient liquidity available to reach eventual market recovery," the special committee of Dynegy's board of directors said in a letter to the company's shareholders, obtained by Reuters.
Icahn has said that if he is not successful in closing the deal, Icahn Enterprises may seek to discuss with Dynegy the potential for debt or equity financing.
Dynegy's management is also under fire from Seneca. The hedge fund has launched a campaign to have Chief Executive Bruce Williamson and another director replaced on the company's board and has asked that all of the company's senior management be reviewed.
"The Dynegy board and management have lost the necessary credibility to effectively steward Dynegy," Seneca said in a filing with regulators earlier this week.
Dynegy declined to comment on the tender offer. Icahn was not immediately available for comment.
(Reporting by Michael Erman; Editing by Gary Hill, Bernard Orr)