NEW YORK, Dec 3 - Electricite de France offered to buy a 50 per cent stake in Constellation Energy’s nuclear business for $4.5bn, in an attempt to scuttle a $4.7bn takeover by Warren Buffett’s MidAmerican Energy.
In October, EDF dropped a previous bid for Constellation, saying the credit crisis had made financing more difficult to obtain.
News of the latest offer sent its shares down 3.5 per cent to €43.02.
EDF, the world’s largest nuclear utility, said on Wednesday the deal will also include an option for Constellation to sell up to $2bn in non-nuclear power assets to the utility.
The French company made the offer in a letter to Constellation’s board, which argued the MidAmerican deal was too low.
It said it would also make an immediate $1bn cash investment to address Constellation’s liquidity needs, but that would be credited against the $4.5bn payment for the nuclear plants.
Under the terms of the deal, Constellation would remain a standalone company.
Still, completing the deal could be difficult for EDF, because it has to contend with stringent breakup terms set in Buffett’s agreement to buy Constellation, as well as doubts previously voiced by Constellation about the certainty that an EDF-backed deal could close.
”Constellation is fundamentally strong and EDF, like many others, believes that the proposed MidAmerican transaction significantly undervalues Constellation and its future opportunities,” Pierre Gadonneix, EDF’s chairman and chief executive said in a statement.
EDF, Constellation’s largest shareholder with nearly 10 per cent of the company’s common shares, could stand to gain more from the deal than just the power generation assets – it might be able to buoy the value of its stake in Constellation above the $26.50 a share level set in the MidAmerican deal.
EDF claims its deal values the company at around $52 per share. Approval from the Maryland Public Service Commission would not be necessary, EDF said, and it expects to be able to close the deal within six to nine months of the MidAmerican deal’s termination.
It plans to finance the transaction through corporate funds and credit facilities. JPMorgan is the exclusive financial advisor to EDF.
Berkshire Hathaway subsidiary MidAmerican agreed to buy Constellation in September, rescuing a company that was on the brink of bankruptcy.
The company faced liquidity issues due in part to ties of its trading business to Lehman Brothers, and its shares fell as low as $16.70, down from nearly $108 in January.
As part of its deal, MidAmerican gave the power company an immediate $1bn cash infusion.
If the deal falls through, Constellation would have to issue about 20m common shares to MidAmerican, or about 9.9 per cent of its outstanding shares and pay it about $593m in cash.
The company would also have to issue $1bn in 14 per cent senior notes to MidAmerican, due to be repaid in December 2009.
Constellation shareholders are set to vote on the deal on December 23.
The company has said if the MidAmerican deal falls apart, it will also likely need to take immediate liquidity actions.
”We are focused on completing our merger with MidAmerican Energy Holdings and beyond that, we cannot comment on market rumour and speculation,” Robert Gould, Constellation spokesman, said when rumours of the bid surfaced.
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