updated 8/13/2010 11:07:14 AM ET 2010-08-13T15:07:14

Asset manager Blackstone Group said Friday it is paying $542.7 million to take Dynegy Inc. private in a three-way deal that will see Dynegy also sell four power plants to NRG Energy Inc.

New York-based Blackstone is taking on more than $4 billion in Dynegy debt as well, bringing the deal's total value to $4.7 billion.

Dynegy said its shareholders will receive $4.50 per share in cash for its nearly 120.6 million shares outstanding, representing a 62 percent premium from the stock's closing price on Thursday.

Shares jumped $1.68, or more than 60 percent, to $4.46 in morning trading.

Dynegy owns power plants around the U.S. and sells electricity mostly to wholesale markets in New York, California and the Midwest. The company has struggled as energy prices fell during the recession. It lowered its profit outlook several times last year and wrote down the value of its plants. The Houston-based company reported losses of $1.2 billion in 2009 and posted an additional loss of $191 million in the latest quarter that ended June 30.

Its shares have tumbled 79 percent over the past 52 weeks.

"Dynegy's board of directors believes the proposed transaction with Blackstone provides our stockholders with a significant premium over the current stock price and removes the risks to the existing stockholders associated with volatile commodity prices, challenging capital markets and environmental and regulatory uncertainties," said Bruce A. Williamson, Dynegy chairman, president and CEO.

The company expects to hold a special stockholder meeting on the deal in the fourth quarter, with the acquisition expected to close by the end of the year.

In conjunction with its sale to Blackstone, Dynegy is selling four natural gas-fired power plants in California and Maine to NRG Energy for $1.36 billion in cash. NRG says the move will fill the gap in its combined-cycle portfolio in its main markets. The companies expect the deal to close by year-end. NRG, based in Princeton, New Jersey, said it will be funded with cash and other financing.

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