BetterTrades looks at the Possible Takeover of Constellation Energy - December 3, 2008

Can it be? Someone has actually challenged Warren Buffet in a proposed takeover of another company. In news released early Wednesday morning, France’s state-controlled power company contested the offer made by the “Oracle of Omaha” in the purchase of Constellation Energy Group (CEG).

Electricite de France SA (EdF) offered the Baltimore-based company $4.5B for only half of CEG’s nuclear power business. Today’s offer matches the total bid from Buffet’s MidAmerican Energy Holdings Co., which was for the entire company. Buffets’s offer, which was made nearly three months ago, is believed to be too low. Numerous lawsuits have already been filed by shareholders.

Electricite de France SA, which is already the largest shareholder in Constellation Energy, owns 9.5% of the company and values CEG near $52 per share. Meanwhile, Buffet’s proposal values the company at only $26.50 per share. Read more about the Constellation bid at Yahoo! News.

Also included in the offer, EdF is willing to post $1B upfront to put into Constellation as part of the proposed deal, along with allowing CEG to sell non-nuclear generating assets to the French company for an additional $2B. MidAmerican was also willing to place $1B upfront to CEG in the deal proposed earlier.

Non-nuclear assets from CEG include coal- and natural gas-fired electric plants, in addition to oil and renewable energies such as geothermal, hydropower and solar.

Constellation's nuclear power business includes three nuclear power stations with five nuclear reactors located in New York and Maryland. The company’s nuclear power accounts for 61% of all Constellations’ electricity generating capacity of nearly 9,000 megawatts.

One of the benefits from EdF’s offer comes in the form of having a partner within the U.S. to help develop and new European nuclear power generating program. Another benefit would be that EdF could avoid strenuous government regulation to a foreign company by owning a U.S. nuclear facility.

In order to expand beyond the countries boundaries, Electricite de France SA recently purchased British Energy, in what was the company’s largest takeover in history, for $19B. It was here that the company took a foothold in Britain’s nuclear power industry.

At the time of posting, shares of Constellation Energy Group surged more than 11% on news of a possible buyout. Shares were trading near $28 per share.

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