Constellation accepts EdF offer
Electricité de France has reached a "definitive investment agreement" with US utility Constellation Energy to acquire half of its nuclear generation and operation business for $4.5 billion, rejecting an offer from MidAmerican of $4.7 billion for the entire company.
In a statement, the companies said that "upon careful consideration, and in consultation with its financial and legal advisors, Constellation Energy’s board has determined that the revised EdF Group proposal is in the best interests of Constellation Energy’s shareholders. In conjunction with the agreement, MidAmerican Energy Holdings Company and Constellation Energy have jointly terminated the prior merger agreement, as separately announced today."
Under the terms of the agreement, in addition to acquiring 50% of Constellation's nuclear business for $4.5 billion, EdF will also provide for an immediate $1 billion cash investment in Constellation. The deal will also include an option for Constellation to sell up to $2 billion worth of non-nuclear generation assets to EdF.
EdF has also provided Constellation with a $600 million interim finance facility, which will remain available until receipt of all regulatory approvals relating to the transfer of the non-nuclear generation assets or for six months, whichever is earlier. The transaction is expected to close in six to nine months.
Constellation's chairman, president and CEO, Mayo Shattuck, said "This agreement with EDF Development Inc provides an opportunity for Constellation Energy shareholders to achieve greater value for the company’s significant asset base." He added, "The investment also provides the liquidity support to stabilize and grow our business as an independent public company dedicated to serving our customers across the country. EdF Group has been a proven partner of ours in the development of new nuclear plants in the US, and we welcome their involvement in the ownership of our existing fleet."
Pierre Gadonneix, EdF's chairman and CEO, commented: "This agreement further illustrates the strong relationship between EdF Group and Constellation Energy with the shared objective of leading the nuclear renaissance in the US." He added, "EdF Group and Constellation Energy intend to develop four Evolutionary Power Reactors (EPR) through the UniStar joint venture with the immediate focus on breaking ground for Calvert Cliffs Unit 3 as soon as the regulatory process allows, perhaps as early as 2009."
In mid-September, MidAmerican Energy Holdings - over 80% owned by Berkshire Hathaway, which itself is chaired by billionaire Warren Buffet - offered to buy Constellation for some $4.7 billion. Additionally, under the transaction, Constellation would issue $1 billion of preferred equity yielding 8% to MidAmerican. That deal was approved by the boards of both companies.
Days later, EdF submitted a bid for Constellation, rivalling the surprise takeover move made by MidAmerican. However, the bid was rejected by Constellation's board, which said that it remained committed to MidAmerican's offer. EdF subsequently withdrew its offer and said it would not make an improved one.
However, on 2 December EdF made a surprise proposal to Constellation to acquire half of its nuclear generation and operation business for $4.5 billion, an offer it said was a "superior alternative" to MidAmerican Energy's offer. A week later, Constellation announced that its board of directors has authorized the company to begin discussions with EdF related to its proposal.
Constellation describes itself as a major generator of electricity in the USA, owning 83 electricity generating plants across the country, with a combined generating capacity of some 9000 MWe. More than 60% of Constellation's generating output is from nuclear power plants - its nuclear generation division operates five reactors at three sites (Nine Mile Point and R E Ginna in New York; and Calvert Cliffs in Maryland).
