Billionaire investor Carl Icahn said he had agreed to buy power producer Dynegy Inc. for $665 million in cash, just three weeks after a bid by private equity firm Blackstone Group failed to win over Dynegy shareholders.

The offer of $5.50 a share by Icahn Enterprises LP is 10 percent higher than Blackstone's bid and calls for Dynegy to continue soliciting other buyers until Jan. 24, the companies said in a press release.

Dynegy sought other buyers earlier this year but failed to attract a price higher than the Blackstone bid.

Icahn Enterprises, which owns about 9.9 percent of Dynegy's outstanding shares and holds options to buy another 5 percent, said it might support a superior all-cash offer for Dynegy if one emerged.

Dynegy has struggled in recent years amid soft power prices and high debt, which stands at about $3.95 billion, and has long been considered a merger candidate.

The company owns about 12,100 megawatts of power production capacity on the East Coast, Illinois and the West Coast. It was once a rival to Enron Corp. and was forced to undergo significant restructuring after Enron's demise decimated the power and gas trading businesses.

The company is very sensitive to natural gas prices and has suffered as oversupply has driven down the value of the fuel. It has forecast negative cash flow of $1.6 billion between 2011 and 2015.

Icahn and hedge fund Seneca Capital opposed the failed Blackstone bid for Dynegy, calling it too low.

IEP will start a tender offer for Dynegy shares by Dec. 22.

Goldman Sachs & Co. and Greenhill & Co. LLC are the financial advisers to Dynegy in the deal.

Houston-based Dynegy's shares closed at $5.45 on Tuesday on the New York Stock Exchange. They were up almost 2 percent in premarket reading on Wednesday.