All about business

Electricite de France SA (EDF.PA: Quote, Profile, Research, Stock Buzz) offered to buy a 50 percent stake in Constellation Energy Group Inc’s (CEG.N: Quote, Profile, Research, Stock Buzz) nuclear business for $4.5 billion, in an attempt to scuttle a $4.7 billion takeover by Warren Buffett’s MidAmerican Energy Holdings Co.

EDF, the world’s largest nuclear utility, said on Wednesday the deal will also include an option for Constellation to sell up to $2 billion 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 $1 billion cash investment to address Constellation’s liquidity needs, but that would be credited against the $4.5 billion 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,” EDF Chairman and Chief Executive Pierre Gadonneix said in a statement.

EDF, Constellation’s largest shareholder with nearly 10 percent 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 credit score.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 (JPM.N: Quote, Profile, Research, Stock Buzz) is the exclusive financial advisor to EDF.

BUFFETT’S HAUL

Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz) (BRKb.N: Quote, Profile, Research, Stock Buzz) 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 (LEHMQ.PK: Quote, Profile, Research, Stock Buzz), 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 $1 billion cash infusion.

If the deal falls through, Constellation would have to issue about 20 million common shares to MidAmerican, or about 9.9 percent of its outstanding shares and pay it about $593 million in cash. 

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