By Dan Primack
November 23, 2010

The Blackstone Group’s pursuit of Dynegy (DYN) has come to an end.

The troubled power company just sent out a statement that said, in part:

At this time, Dynegy anticipates that the proposal will not receive the necessary votes to be adopted. Blackstone and Dynegy therefore intend to terminate the merger agreement.

It adds that it “intends to immediately commence an open strategic alternatives process to┬ásolicit proposals from potentially interested parties and carefully review its standalone restructuring alternatives.”

Dynegy originally agreed to be acquired by Blackstone (BX) for $4.50 per share, after which Blackstone would have sold four natural gas-fueled power plants to NRG Energy for $1.36 billion. Certain activist shareholders objected — with Seneca Partners promising a proxy fight and Carl Icahn offering a $2 billion line of credit to stem liquidity woes.

Blackstone responded by raising its bid to $5 per share, but insisted that it was a “final” offer. Last week’s shareholder vote was postponed until today.

Dynegy now says it will contact a “broad group of strategic and financial buyers,” including Seneca and Icahn. The company had not received a superior offer to Blackstone’s during a recent “go-shop” period, so the real question now is if Icahn will step up with the pledged credit (and, if so, at what terms).

For its part, Blackstone is just sitting back and (unofficially) hoping for the bankruptcy that Dynegy management argued was inevitable without the private equity firm’s intervention. Then Blackstone can just step in and scoop up the pieces at an even cheaper price…

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