EDF drops Consellation bid as credit tight
PARIS (Reuters) - French power company EDF (EDF.PA) said on Wednesday it would not make a competing bid for U.S. power company Constellation Energy Group Inc CEG.N because the credit crisis has made financing more difficult to obtain.
MidAmerican Energy, a unit of Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N), agreed to buy Constellation last month for $4.7 billion in cash after fears that the U.S. power company could face liquidity issues sent its shares plummeting.
EDF later disclosed that, along with private equity funds Kohlberg Kravis Roberts & Co KKR.UL and TPG TPG.UL, it had proposed a $6.24 billion bid to Constellation. That offer received no response from Constellation, which moved ahead with the MidAmerican bid instead.
The French company, which owns nearly 10 percent of Constellation, had continued to examine its options for a deal with the U.S. power company until the economic downturn made such a transaction too difficult.
"Given the current state of financial markets and in particular the difficult credit market for corporates, and after discussions with several potential American partners, EDF has determined that current conditions are not conducive to presenting a new offer for Constellation Energy Group," the company said in a statement.
Shares of Constellation fell $1.57, or 6.13 percent, to close at $24.05 on the New York Stock Exchange.
Even if EDF had managed to put together a higher bid for the company, it would have been tough for it to prevail in buying Constellation.
As part of its deal, MidAmerican has already made a $1 billion cash investment in Constellation in exchange for preferred shares that are convertible into a roughly 20 percent stake in the company if their deal is scuttled.
That would mean competing bidders would have to pay 20 percent more for the company even if they offered no premium to Buffett's $26.50 a share bid.
EDF would also have to contend with U.S. regulations for ownership of nuclear plants and a standstill agreement it had signed with Constellation that limits its ability to raise its stake in the company.
Nevertheless, EDF said the United States was still one of its four target countries for international nuclear development.
It also confirmed its objective of developing at least four European Pressurised Reactors (EPR) in the United States in partnership with one or several American players. It said it continues to review closely all possible options.
The French group is a world leader in nuclear power stations, which make up the major part of France's electricity generation, and many countries are now looking again at nuclear power for its low CO2 greenhouse gas emissions and national strategic independence from oil and gas exports at times of high prices.
Waste, radiation and security issues mean nuclear energy is a political and social hot potato in many countries, such as Germany which is phasing nuclear stations out.
EDF is already acquiring British Energy Group Plc BGY.L Plc, owner of the UK reactor's network, for 12.5 billion pounds.
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