Constellation Energy Sticks With Buffett's Lower Offer

Looks like EDF did make a bid after all.

• A French nuclear power company is upping the ante for wholesale power supplier Constellation Energy Group Inc. (CEG), offering to pay $8.50 per share more for the company, which has agreed to be sold to a unit of Warren Buffett's Berkshire Hathaway Inc. Electricite de France SA offered Monday to pay $35 per share for the Baltimore company.
• EDF made the offer in conjunction with private equity firms Kohlberg Kravis Roberts & Co. and TPG Capital. EDF owns nearly 10 percent of Constellation Energy now.

But Constellation CEO is adamant he is sticking with Buffet despite the far lower price - boggling. Why the board of directors, who are supposed to represent shareholders, is not stomping its feet is beyond me.

• Power company Constellation Energy Group Inc. on Monday defended its decision to accept a buyout from Warren Buffett's MidAmerican Energy Holding over a higher offer from French energy giant EDF and two private equity groups. "We accepted the superior offer," Constellation Chairman, Chief Executive and President Mayo Shattuck III told a conference call.
• But in a filing with the U.S. Securities and Exchange Commission, EDF, the French utility controlled by the French government, said it, Kohlberg Kravis Roberts & Co [KKR.UL] and TPG Capital LP [TPG.UL] had notified Constellation prior to the signing of a definitive takeover agreement with MidAmerican that they planned to make an offer. That offer was to include a $1 billion cash infusion, matching a component of MidAmerican's deal, but would have increased the offer to $35 per share, or about $6.24 billion.
• "The Constellation board of directors has not responded to the proposal request," EDF said in its filing. The group has not submitted a formal bid.
• "I am positive that they are not happy about the developments as a 9.9 percent shareholder ... (but) the events last week put us in in position where we had to look for the superior offer," Shattuck said.

Perhaps my definition of "superior" offer is different from the CEO's. The stock is bid up to $27.50 which is nowhere near the EDF price but a buck over Warren's price. Perhaps this indicates the market believes Buffet will raise the bid (maybe to $28-$29) higher than the original $26.50 but below the $35 EDF price in a bid to placate shareholders. Fascinating.

Disclosure: Author has no position.

Comments

[valuenovice:]

what are these bozos doing?! that's some serious dough they are leaving on the table and some of it should be mine cue the lawyers, stage right!!! arrogant turds

2008 Sep 22 03:55 PM

[LawHoo97:]

let's see, you only get the $$ if the deal closes, which requires PSC approval... approving a sale to a partnership that includes KKR (viewed as corporate pirates in MD) and a French firm (can't control nukes) is far more risky than approval to a suitor viewed as a white knight who has promised not to sell it off, but to operate the company in toto. Warren may offer a bit more, but the KKR/EDF offer wasn't even close.... even at $8.50 more a share.

2008 Sep 22 04:11 PM

[Chris G:]

Also, do we really want foreign interests controlling the power supply near the nation's capital?

2008 Sep 24 03:16 PM