EDF offers $6.5 billion for Constellation assets
EDF (EDF.PA: Quote, Profile, Research, Stock Buzz) unveiled a $6.5 billion deal to buy 50 percent of Constellation Energy Group’s (CEG.N: Quote, Profile, Research, Stock Buzz) nuclear assets and some other assets in an attempt to torpedo a rival bid from Warren Buffett.
The proposed offer would give EDF, the world’s largest nuclear utility, a solid foothold in the United States - the world’s biggest nuclear energy market - and represents a major plank of its global expansion strategy.
Shares in EDF, which have lost more than 45 percent so far this year, were down nearly 6 percent in early trade on Wednesday. By 0936 GMT, EDF was down 5.6 percent at 42.08 euros while the French blue-chip index .FCHI was 1.8 percent lower.
“EDF is right to invest in nuclear in the United States. But I am afraid that it is overpaying a bit for Constellation,” said David Thebault, sales trader at Paris broker Global Equities.
EDF is also trying to secure European Union anti-trust approval for its acquisition of British Energy (BGY.L: Quote, Profile, Research, Stock Buzz) announced in September and has set its sights on China and South Africa.
EDF said on Wednesday it had sent a letter to Constellation’s board saying it was offering $4.5 billion for half of Constellation’s nuclear power business which operates five reactors on the east coast of the United States.
It also proposed to spend up to another $2 billion to buy non-nuclear assets such as gas, oil and coal-generation operations.
EDF’s indicative offer would include an upfront cash injection of $1 billion and would value the whole of Constellation at around $52 a share, EDF said — a significant premium to its closing share price of $25 payday loans online.15 on Tuesday.
The terms top a rival offer of $4.7 billion from Buffett’s Berkshire Hathaway (BRKa.N: Quote, Profile, Research, Stock Buzz) (BRKb.N: Quote, Profile, Research, Stock Buzz) unit MidAmerican Energy Holdings for Constellation that valued the U.S. energy company at $26.50 per share.
EDF, Constellation’s largest shareholder with nearly 10 percent of the company’s equity, stands to gain more from the deal than just the power generation assets as it could boost the value of its investment in Constellation.
EDF said it expected to win the necessary regulatory approvals for the deal and close it within six to nine months after signing a definitive agreement with Constellation.
Under the terms of EDF’s proposal, Constellation would stay a standalone company.
“Constellation is fundamentally strong and EDF, like many others, believes that the proposed MidAmerican transaction significantly undervalues Constellation and its future opportunities,” said EDF Chairman and Chief Executive Pierre Gadonneix in a statement.
In October, EDF dropped a bid for Constellation, saying the credit crisis had made financing more difficult to obtain.
In September, MidAmerican agreed to buy Constellation, which was on the brink of bankruptcy and also offered a $1 billion cash injection as part of its proposal.
Filed under: legal by Pascal