Electricite de France, the world's biggest operator of atomic reactors, has offered to pay US$4.5 billion for half of Constellation Energy Group's nuclear business to expand in the United States and thwart a rival bid from billionaire Warren Buffett.
The proposal includes a US$1-billion cash investment and an option for the US utility to sell to EDF non-nuclear assets of as much as US$2 billion, Paris-based EDF said. Constellation agreed earlier this year to be bought by Berkshire Hathaway's MidAmerican Energy Holdings for US$4.7 billion.
In October, EDF, which owns 9.5 percent of Constellation, 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 US and avoid possible opposition to foreign ownership of nuclear facilities. "This is good for the long-term prospects of EDF in the US," 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 a low point." Scarpoaci said.
EDF fell as much as 6.6 percent to 41.615 euros (US$52.8) in Paris and was 2.455 euros, or 5.5 percent, down at 42.115 euros at 11:26am local time. The shares have declined 48 percent this year, Bloomberg News said.
"The offer is aimed at consolidating our role in developing new nuclear in the US," said EDF Chief Executive Officer Pierre Gadonneix.
"It would bring long-term resources to Constellation," he said, adding it was "far superior" to MidAmerican's bid.
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 US$52 a share, more than double yesterday's closing price of US$25.15.
"Constellation is fundamentally strong and EDF, like many others, believes that the proposed MidAmerican transaction significantly undervalues Constellation and its future opportunities," Gadonneix said. 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 financial turmoil would wreck its energy-trading business.
In September, EDF agreed to buy British Energy Group for 12.5 billion pounds (US$18.5 billion) to become the United Kingdom's biggest power producer and gain control of eight sites for reactors.
