Dynegy Inc. on Wednesday told shareholders that “it is in no way associated with Main Street AC and expresses no recommendation on the unsolicited offer,” while Mirant recommended its shareholders not sell any stock to the San Diego-based company that offered to pay cash for 4.9% of the energy merchants Tuesday, as well as Aquila Inc. and Reliant Resources Inc. (see Daily GPI, Sept. 4).

Main Street, a shell corporation that is in its post-bankruptcy reorganization after filing early in 2001, said it had up to $170 million to tender for shares of the four companies, and would pay a premium to their closing prices on Aug. 27.

“It is important for shareholders to note that once their Mirant stock has been tendered, Main Street AC has the right to extend its offer indefinitely,” Mirant said in a written statement. “This has the effect of binding the shareholder to sell the tendered stock to Main Street AC and gives Main Street AC the unconditional right to buy the tendered shares indefinitely.” Mirant had warned on Tuesday that its earnings were tracking about 20 cents lower than they were expected to be.

While Dynegy did not “express” a recommendation, it “suggests its shareholders exercise extreme caution in considering the offer. Mini-tender offers seek less than 5% of a company’s stock, thereby avoiding many disclosure and procedural requirements of the Securities and Exchange Commission (SEC). As a result, mini-tender offers do not typically provide the same disclosure and procedural protections that larger traditional tender offers provide.”

Like Mirant, Dynegy warned its shareholders that Main Street had the right to extend its offer indefinitely, which “has the effect of binding the shareholder to sell the tendered stock to Main Street AC for so long as Main Street AC elects to keep its offer. Main Street AC is under no obligation to return the Dynegy stock to the tendering shareholder.” Typically, these types of companies continue their offer until the stock rises above its purchase price.

The SEC, said Dynegy, has said that mini-tender offers, “have been increasingly used to catch investors off-guard.” Dynegy “urges stockholders who are considering selling their shares to consult with their financial advisers and to exercise caution with respect to this offer.”

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