EDF offers to buy Constellation

Bloomberg

The proposal includes a $1 billion cash investment and an option for the U.S. utility to sell to EDF non-nuclear assets of as much as $2 billion, Paris-based EDF said. Constellation agreed earlier this year to be bought by Berkshire Hathaway’s MidAmerican Energy Holdings for $4.7 billion.

A new approach
EDF, which owns 9.5 percent of Constellation, in October backed out of an earlier bid for the whole company. Its new approach, through a proposed joint venture with the Baltimore-based utility, is designed to ensure EDF can operate plants in the U.S. and avoid possible opposition to foreign ownership of nuclear facilities.

"This is good for the long-term prospects of EDF in the U.S.," said Arnaud Scarpaci, a fund manager at Agilis Gestion in Paris. "EDF has to come up with the cash now, which could be negative in the current climate, but it’s a good time to make acquisitions because the market is at such as low point."

EDF said the proposal "is not subject to a financing condition" and approval from Constellation’s stockholders is not required. The Paris-based utility said its offer values the whole of Constellation at $52 a share, more than double Tuesday’s closing price of $25.15.

"Constellation is fundamentally strong and EDF, like many others, believes that the proposed MidAmerican transaction significantly undervalues Constellation and its future opportunities," EDF Chief Executive Officer Pierre Gadonneix said. The offer provides "more than sufficient liquidity" to allow it to remain a standalone company, he said.Buffett’s MidAmerican moved to snap up Constellation in September for less than half its end-August market value after Constellation plunged 58 percent in New York amid investors’ concern that turmoil in financial markets would wreck its energy-trading business.