EDF close to sealing deal with Constellation Energy trumping Buffett’s offer
17 Dec 2008
In a rare defeat for legendary investor Warren Buffett, his bid for the nuclear assets of Constellation Energy Group Inc, through his company MidAmerican Energy Holdings Co. is close to be trumped by a bid for 50 per cent of the nuclear power provider by French utility Electricite de France SA (EDF).
However, approval by Constellation's board is contingent on waivers of bank covenants and may be announced as early as this week.
Baltimore-based Constellation, the largest US power marketer, accepted MidAmerican's $4.7 billion offer in September to stave off a credit downgrade. EDF, the world's biggest nuclear power producer, made its $4.5 billion bid on 3 December, saying Buffett was paying too little. Five days later, Constellation agreed to open talks with the French company. (See: Warren Buffett's MidAmerican Energy bids $4.7 billion for Constellation Energy / EDF bids $4.5 billion for 50 per cent of Constellation nuclear assets)
EDF has also offered to give Constellation the option to sell it up to $2 billion more of its non-nuclear assets. EDF sees gaining a foothold in the US, the world's biggest nuclear energy market, as a key element in its global expansion strategy. It already owns 9.5 per cent of Constellation outright and has a nuclear venture underway with it.
EDF recently agreed to buy British Energy Group Plc for ?12.5 billion ($19 billion) to gain control of eight nuclear plant sites with potential to build new reactors. EDF wants to develop evolutionary power reactors, or EPRs, in the UK and the US and is already building a 1,650-megawatt model in Flamanville, Normandy. (See: EDF to acquire British Energy for $23.2 billion)
MidAmerican has said it does not plan to raise its bid for Constellation. If Constellation rejects MidAmerican's offer it would have to issue about 20 million common shares to the company, or about 9.9 per cent of its outstanding stock, and pay it about $593 million in cash. EDF aid its bid for a nuclear stake reflects a value of $52 a share for all of Constellation. MidAmerican offered $26.50 a share for the whole company.
