French firm won't bid again

The Baltimore Sun

Constellation Energy Group's largest shareholder, whose higher offer to acquire the Baltimore company was rebuffed for a proposed $4.7 billion deal with Warren Buffett, said yesterday that it will not submit another bid for the firm.

The announcement by Electricite de France could put to an end speculation that has dogged the buyout deal since its inception: That a better offer would triumph.

The transaction still requires approval by state and federal regulators as well as shareholders.

"Although one could never say never, it would appear to me that a chance of another bidder would be substantially less likely," said Paul Patterson, an analyst with Glenrock Associates in New York.

In a brief statement, EDF said the "current state of financial markets and in particular the difficult credit market" for companies is not conducive to making a new offer for Constellation, which is the parent of Baltimore Gas and Electric Co.

EDF spokeswoman Carole Trivi declined to make any additional comment yesterday.

Constellation agreed last month to sell itself for $26.50 a share to Buffett's MidAmerican Energy Holdings Co. as CEG faced a credit crisis threatening its existence.

Under the deal, Buffett also provided an immediate $1 billion cash infusion to shore up Constellation, in exchange for its preferred stock.

Constellation had chosen Buffett over a $35-a-share offer from EDF and two U.S. partners, one of them the private equity firm Kohlberg Kravis Roberts & Co. That upset shareholders, who have since filed several lawsuits.

Constellation Chief Executive Officer Mayo A. Shattuck III has defended the deal with MidAmerican, saying it was the superior offer in part because of Buffett's stabilizing effect on a skittish market and the likelihood of easier regulatory approval.

Constellation spokesman Rob Gould said yesterday that "we look forward to closing the transaction with MidAmerican."

Shares of Constellation lost $1.57, or 6.13 percent, to close at $24.05 yesterday in a steeply falling market.

Constellation's deal with MidAmerican erected high financial barriers to attracting another suitor.

Constellation must pay MidAmerican $175 million if the Baltimore company accepts a better offer from another firm. And MidAmerican would receive a nearly 20 percent stake in Constellation through the conversion of preferred stock and a $1 billion note carrying 14 percent interest due Dec. 31, 2009, according to the merger agreement.

As recently as last week, EDF said it might make a new takeover offer for Constellation. EDF Chief Executive Officer Pierre Gadonneix told Bloomberg News the company had continued talks with KKR.

A KKR spokeswoman declined to comment yesterday.

EDF is Constellation's largest shareholder with a 9.5 percent stake. EDF pursued Constellation after nearly doubling its stake in the company Aug. 28, paying nearly $68.49 a share. It lost more than $340 million in three weeks under the offer from MidAmerican.

Constellation and EDF also have a joint venture called UniStar to build nuclear reactors in the United States.

EDF also said yesterday that it will continue plans to develop nuclear reactor projects with U.S. partners and to "review closely all possible options."

So far, Constellation and MidAmerican have filed applications with several federal regulators for approval of the proposed deal. The company still needs to file an application with the Maryland Public Service Commission.

And a shareholder vote is expected to take place between Thanksgiving and Christmas.

The deal is expected to close in about nine months.

Baltimore Sun reporter Jay Hancock contributed to this article.

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