EDF Makes New Bid of as Much as $6.5 Billion for Constellation Assets

By DANA CIMILLUCA and DAVID GAUTHIER-VILLARS
Electricité de France SA said on Wednesday it is offering to buy as much as $6.5 billion of assets from Constellation Energy Group Inc., the U.S. utility that spurned an earlier offer from the French energy giant and instead agreed to be bought by Warren Buffett's MidAmerican Energy Holdings Co.

Warren Buffett
EDF, the world's largest nuclear utility, is attempting to wrest Constellation from MidAmerican, a unit of Berkshire Hathaway Inc., three weeks ahead of a vote by Baltimore-based Constellation's shareholders on the $4.7 billion MidAmerican deal. Many Constellation shareholders say that deal undervalues the company.
Trying to outflank Mr. Buffett is a bold move for EDF and its chairman, Pierre Gadonneix. But EDF has a lot at stake, including a 9.5% holding in Constellation on which it has suffered heavy losses and a plan to expand its nuclear-power empire in the U.S. that depends on an existing joint venture with Constellation.
The French company also believes that its offer is superior to that of MidAmerican, and would result in a standalone value for Constellation of $52 a share, nearly double what MidAmerican is offering.
As part of the three-pronged deal, EDF is offering to inject $1 billion into Constellation immediately in exchange for preferred shares. That would effectively be a down payment on EDF's offer to take a 50% stake in Constellation's nuclear-power generating and operating business for $4.5 billion. EDF said it will also offer to buy up to $2 billion in nonnuclear-generation assets from Constellation.
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Logos of Electricite de France
Constellation agreed in September to sell itself to Mr. Buffett, after market turmoil hobbled its energy-trading business and forced the company to the brink of bankruptcy. Needing to move quickly, Constellation chose MidAmerican's offer of $26.50 a share, plus a cash infusion of $1 billion, over a $35-a-share deal with EDF, which had teamed up with private-equity firms Kohlberg Kravis Roberts & Co. and TPG to make its bid.
The French state-controlled company later indicated it might make a new offer. This time around, EDF isn't partnering with the buyout firms.
EDF is confident that it won't face significant regulatory hurdles and expects to be able to close the deal six to nine months after signing. Its proposal wouldn't require a new shareholder vote or approval from Maryland state regulators.
Another factor that could work in EDF's favor is the deal Mr. Buffett originally negotiated. Should EDF prevail, Mr. Buffett could walk away with more than $500 million in cash, including a $175 million breakup fee, a $1 billion note and a 10% stake in Constellation, all in exchange for the $1 billion MidAmerican already invested in the company.
The new deal would also ease EDF's concerns about what the MidAmerican deal would mean for UniStar Nuclear Energy, a joint venture between EDF and Constellation to build and operate new nuclear reactors in North America. Constellation also owns a regulated utility, Baltimore Gas and Electric Co.
EDF completed buying its stake in September, when Constellation shares were worth over $60, meaning the price of the Buffett deal represents a loss of hundreds of millions of dollars for the French company.
EDF's new offer isn't conditioned on its ability to raise funds, or due diligence, people familiar with the matter said. EDF plans to finance the transaction with its existing cash and credit.
In trading Wednesday in New York, Constellation's shares rose 10% to $27.70. In Paris, EDF's shares fell to €44.34 ($56.33), down 22 European cents.
Write to Dana Cimilluca at dana.cimilluca@wsj.com and David Gauthier-Villars at David.Gauthier-Villars@wsj.com