EDF abandons $6.24 billion bid for American utility Constellation Energy
17 Oct 2008
Proposed bids being dropped due to adverse credit conditions has become a regular occurrence. The latest to join the bandwagon is French energy major Electricite de France SA (EDF) which has renounced its attempt to wrest control of American power utility Constellation Energy from billionaire investor Warren Buffett for a consideration of $6.24 billion.
MidAmerican Energy, a unit of Warren Buffett's Berkshire Hathaway Inc. agreed to buy Constellation last month for $4.7 billion in cash after fears that the US power company could face liquidity issues sent its shares plummeting. However, EDF, the world's largest operator of nuclear reactors, had intended to wage a battle for the utility before Wednesday's announcement. (See: Warren Buffett's MidAmerican Energy bids $4.7 billion for Constellation Energy)
EDF, along with private equity funds Kohlberg Kravis Roberts & Co and TPG TPG.UL, said it had proposed a $6.24 billion bid to Constellation (See: EDF teams up with KKR, TPG to make $6.2 billion counter bid for Constellation). That offer received no response from Constellation, which moved ahead with the MidAmerican bid instead. With a 10-per cent stake in Constellation, the French company was still exploring its options when the current credit situation forced its hand.
"Given the current state of financial markets and in particular the difficult credit market for corporates, and after discussions with several potential American partners, EDF has determined that current conditions are not conducive to presenting a new offer for Constellation Energy Group," the company said in a statement.
This is not the first deal gone sour in recent times. Rio is reviewing its spending and project costs, Xstrata Plc this month abandoned an $8.7 billion hostile bid for platinum producer Lonmin Plc and Sterlite Industries (India) Ltd., a unit of Vedanta Resources Plc, shelved its $2.6 billion purchase of Asarco LLC. (See: Credit squeeze takes its toll on Xstrata, Roche acquisition bids)
Earlier this week America's largest trash haulier, Waste Management, withdrew its $6.73 billion offer for Republic Services Inc., saying in a statement that ''given the current state of the financial markets, we believe that it would not be prudent to continue to pursue the acquisition.'' (See: Credit squeeze ends WM's $6.73-billion hostile bid for Republic)
Constellation declined $1.57 to $24.05 in New York trading after the announcement, below Buffett's offer of $26.50 a share. EDF fell as much as 6 per cent to €38.34 in Paris, before rallying to trade 0.5 per cent up at 41 euros at 8:44 a.m. Paris time.
MidAmerican and Constellation said on 14 October they had asked the Federal Energy Regulatory Commission to approve the takeover by 15 January. Approval will also be needed from other federal regulators, as well as utility regulators in Maryland.