EDF Offers to Buy Constellation Assets, Challenges Buffett

By Tara Patel and David Whitehouse

Dec. 3 (Bloomberg) -- Electricite de France SA, the world’s biggest operator of atomic reactors, offered to pay $4.5 billion for half of Constellation Energy Group Inc.’s nuclear business to expand in the U.S. and thwart a rival bid from billionaire Warren Buffett.

The proposal includes a $1 billion cash investment and an option for the U.S. utility to sell to EDF non-nuclear assets of as much as $2 billion, Paris-based EDF said. Constellation agreed earlier this year to be bought by Berkshire Hathaway Inc.’s MidAmerican Energy Holdings Co. for $4.7 billion.

EDF, which owns 9.5 percent of Constellation, in October backed out of an earlier bid for the whole company. Its new approach, through a proposed joint venture with the Baltimore- based utility, is designed to ensure EDF can operate plants in the U.S. and avoid possible opposition to foreign ownership of nuclear facilities.

“This is good for the longterm prospects of EDF in the U.S.,” said Arnaud Scarpaci, a fund manager at Agilis Gestion in Paris. “EDF has to come up with the cash now, which could be negative in the current climate, but it’s a good time to make acquisitions because the market is at such as low point.”

EDF fell as much as 6.6 percent to 41.83 euros in Paris and were 2.79 euros, or 6.3 percent, down at 41.78 euros at 8:42 a.m. local time. The shares have declined 49 percent this year.

Utility Takeovers

EDF said the proposal “is not subject to a financing condition” and approval from Constellation’s stockholders is not required. The Paris-based utility said its offer values the whole of Constellation at $52 a share, more than double yesterday’s closing price value of $25.15.

“Constellation is fundamentally strong and EDF, like many others, believes that the proposed MidAmerican transaction significantly undervalues Constellation and its future opportunities,” EDF Chief Executive Officer Pierre Gadonneix said in the statement. The offer provides “more than sufficient liquidity” to allow it to remain a standalone company, he said.

Buffett’s MidAmerican moved to snap up Constellation in September for less than half its end-August market value after Constellation plunged 58 percent in New York amid investors’ concern that turmoil in financial markets would wreck its energy-trading business.

“The timing of the bid is worrying investors because of the current credit climate,” Chicuong Dang, a Paris-based analyst at KBL Richelieu Gestion, which has about $6.2 billion under management, said by telephone. “EDF’s offer is reasonably priced. Buffett’s offer is really low.”

“EDF has to be present in the U.S. market if it wants to be a world nuclear leader,” he added.

Competing Offer

Constellation has called on shareholders to approve the deal with MidAmerican, priced at $26.50 a share, in a vote Dec. 23.

The U.S. power company said yesterday that 2009 profit will fall to as little as $1.50 per share should shareholders reject the takeover by MidAmerican. Constellation rose $1.22, or 5.1 percent, to $25.15 yesterday in New York Stock Exchange composite trading. The stock has dropped 75 percent this year.

The offer comes after EDF agreed in September to buy British Energy Group Plc for 12.5 billion pounds ($18.5 billion) to become the U.K.’s biggest power producer and gain control of eight sites to build reactors.

The purchase of British Energy, based in East Kilbride, Scotland, is part of the French utility’s strategy to run atomic plants outside Franc and adds commercial clients to the 5 million households EDF’s U.K. unit supplies. The European Commission yesterday extended its review of that deal by 10 working days to Dec. 22.

Exelon Corp., the biggest U.S. utility company by market value, offered in October to buy NRG Energy Inc. for $6 billion in stock, betting it will be able to refinance NRG’s $8 billion in debt at lower costs. NRG, based in Princeton, New Jersey, has urged its shareholder to reject the bid, which would create the largest U.S. power producer.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.netDavid Whitehouse in Paris at dwhitehouse1@bloomberg.net