EDF Said to Agree on $23 Billion Acquisition of British Energy

By Tara Patel and Sandrine Rastello

Sept. 24 (Bloomberg) -- Electricite de France SA agreed to buy British Energy Group Plc for 12.4 billion pounds ($23 billion) to gain access to U.K. nuclear plants and sites for new reactors, according to two people familiar with the matter.

The bid values the biggest U.K. power producer at 774 pence a share, or 9 pence more than a previous cash bid from EDF, Europe's largest electricity generator, according to two people, who didn't want to be identified because the terms of the transaction have not been made public. EDF plans to proceed with a formal offer because British Energy has indicated it would accept, and will make an announcement today, they said.

The takeover, after more than four months of talks, would give EDF control of eight British nuclear plants. The French utility already supplies gas and electricity to about 5 million customers in the U.K. The purchase by EDF, whose 58 nuclear plants produced 77 percent of France's electricity last year, comes as the U.K. government seeks investment in atomic energy.

The move is part of a global trend toward nuclear energy after oil prices soared to records this year, and amid pressure from environmentalists to cut pollution stemming from burning fossil fuels. The French government owns 85 percent of EDF.

East Kilbride, Scotland-based British Energy, of which the U.K. government owns 36 percent, rejected an offer on July 31 from EDF at 765 pence a share. British Energy's biggest private shareholders said the bid undervalued its nuclear stations and adjacent land where more reactors may be built.

Offer to Shareholders

The offer to British Energy shareholders includes an alternative to an all cash offer, in the form of 700 pence plus Contingent Value Rights, or CVRs, which give shareholders a slice of future profits, one of the people said.

EDF called a press conference in Paris for 8:45 a.m. local time today. The meeting will be held at the Pavillon d'Armenonville in the Bois de Boulogne in the west of the city.

The Wall Street Journal Web site reported that a deal has been agreed and will be announced today. EDF spokesman Francois Molho and British Energy official Andrew Dowler declined to comment, as did Alison Merrigan, a spokeswoman for Invesco Ltd., British Energy's largest private shareholder, and a U.K. government spokesman.

Electricite de France fell 34 cents, or 0.7 percent, to 50.15 euros on Euronext in Paris yesterday while British Energy slipped 4.5 pence, or 0.6 percent, to 724 pence in London. British Energy has gained 32 percent since the start of this year.

Centrica Role

Centrica Plc, the U.K.'s biggest energy supplier, said on Aug. 4 it was in talks to take a ``minority ownership position'' in British Energy if the company was sold. Centrica's Chief Executive Officer Sam Laidlaw is seeking assets to reduce the company's exposure to energy market fluctuations.

An announcement of a deal between EDF and British Energy will likely include a reference to Centrica's planned role, which may not be defined in detail until the takeover receives regulatory approval, two people familiar with the talks said. Andrew Turpin, a spokesman for Centrica, declined to comment.

The BBC reported that Centrica will take 25 percent of all power generated by British Energy, once it is owned by EDF, and a 25 percent stake in new nuclear generators built by the French company.

The cost to Centrica of this investment will be about 3 billion pounds, the BBC said on its Web site, without saying where it got the information.

U.S. Target

Electricite de France is not only seeking an acquisition in the U.K. On Sept. 22 it said it had made a proposal three days earlier to buy Baltimore-based Constellation Energy Group Inc. with U.S. buyout firms KKR & Co. LP and TPG Capital.

The plan included a takeover approach at $35 a share for the utility.

The French company is countering an agreed offer from Warren Buffett's MidAmerican Energy Holdings Co. to buy Constellation for about $4.7 billion. The cash deal is worth $26.50 a share. Buffett's Berkshire Hathaway Inc. is the world's sixth-biggest company by market capitalization, worth $223.4 billion, according to Bloomberg data. Until Buffett's approach, EDF was the biggest shareholder in Constellation, with 9.5 percent.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Sandrine Rastello in Paris at srastello@bloomberg.net