Constellation Board Authorizes EDF’s Late Challenge to MidAmerican’s Takeover Bid

Constellation Energy announced on Monday that its board of directors had authorized the company to begin talks with Électricité de France (EDF), following the French nuclear giant’s unsolicited proposal earlier last week to buy 50% of Constellation’s nuclear generation and operation business for $4.5 billion.

The Baltimore company’s board had in mid-September approved an acquisition bid from MidAmerican Energy, a company whose majority owner is Warren Buffet’s Berkshire Hathaway, for $4.7 billion. EDF had also then submitted a rival bid for Constellation, but Constellation’s board had rejected it.

On Monday, Constellation stressed that its board had not “withdrawn, modified, or qualified,” its recommendation that shareholders vote in favor of the MidAmerican merger on Dec. 23, 2008.

It said the decision to begin discussions with EDF was made following consultation with its legal and financial advisors, and “in a manner consistent with its fiduciary responsibilities to shareholders, as well as its responsibilities under its definitive merger agreement with MidAmerican Energy Holdings Company.”

EDF’s proposal last week included the offer to immediately invest $1 billion in Constellation against the $4.5 billion purchase price, with EDF surrendering the preferred stock to Constellation Energy as partial payment.

EDF also offered to provide Constellation with additional liquidity by entering into an asset put option, so that Constellation Energy could, at its option—before EDF’s acquisition of the 50% interest in Constellation Energy’s nuclear generation and operation business—sell to EDF non-nuclear generation assets with an aggregate value of up to $2 billion.

MidAmerican did not publish a written statement responding to Constellation’s recognition of EDF’s proposal, but it was widely reported that the company had decided not to raise its bid for Constellation.

Constellation Energy owns more than 9,000 MW of generating capacity (PDF) in seven U.S. states, 61% of which is nuclear power. 

The company also co-owns UniStar Nuclear Energy along with the EDF Group. Currently, UniStar has four nuclear projects under development: Calvert Cliffs Unit 3 in Maryland; Callaway Unit 2 in Fulton, Mo.; Bell Bend Unit 1 near Berwick, Pa.; and Nine Mile Point Unit 3 near Oswego, N.Y.

EDF is already the world’s largest nuclear plant operator, with 58 reactors. The French company in September won a $18.7 billion takeover bid for British Energy, the company that owns eight of the UK’s 10 nuclear power plants.

On Tuesday, the Associated Press reported that EDF had raised its stake in British Energy to a massive 88.67%, and that it would extend its offer to secure the remaining shares until Jan. 5.
Sources: Constellation Energy, UniStar Nuclear Energy, EDF, Associated Press

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