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EdF takes on Buffett with new Constellation bid
2008-12-03
PARIS - Electricite de France SA said Wednesday it will challenge famed investor Warren Buffett's planned takeover of U.S. wholesale power generator Constellation Energy Group Inc. by offering $4.5 billion for half of the company's nuclear power business. France's state-controlled power company, which backed down from a full takeover bid for Constellation in October, said it had offered to take a 50-percent stake in Constellation's nuclear operations through a joint venture. Shares in EdF sank following the announcement, falling 5.6 percent to euro42.07 ($53.42) in early afternoon Paris trading amid investor fears that a bruising takeover battle may be brewing. EdF, which owns 9.5 percent of Constellation, said the offer values the company at around $52 per share and that the price represents a 96-percent premium to a rival takeover proposal for all of Constellation by Buffett's MidAmerican Energy Holdings Co., which is offering $26.50 per share. The bid is EdF's "last chance to change minds, not of Constellation's management, but of its investors," said industry analyst Peter Wirtz of WestLB Research based in Dusseldorf. He said EdF stands little chance of succeeding despite a "clearly very attractive offer" because at a time of global economic and financial upheaval, investors are more likely to be lured by MidAmerican's complete takeover bid than by the more complex offer of EdF. The French company's decision to take a second run at Constellation also shows "it has no Plan B for the U.S. market," Wirtz said. EdF's offer includes a $1 billion "upfront" cash infusion in Constellation, and an option to sell up to $2 billion of "non-nuclear generation assets" to the French company in a deal that could close in six to nine months. Constellation's nuclear business includes three nuclear power stations with five reactors located in Maryland and New York. Nuclear power accounts for 61 percent of Constellation's total electricity generating capacity of 8,700 megawatts. Constellation's non-nuclear assets include coal- and natural gas-fired electric plants, as well as oil and renewable energies such as solar, geothermal and hydro power. On Tuesday, Baltimore, Maryland-based Constellation said it likely would have filed for bankruptcy protection without an immediate $1 billion infusion from MidAmerican, a unit of Buffett's Berkshire Hathaway Inc. Constellation also warned in a U.S. regulatory filing that unstable market conditions make the deal with MidAmerican critical. MidAmerican announced in September that it offered to buy Constellation for $26.50 per share -- plus the $1 billion cash injection. EdF pulled its $35 per share offer in October and has called MidAmerican's offer for Constellation inadequate.
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