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French Giant May Back Away From Challenge to Warren Buffett's Constellation Deal

Tuesday, 23 Sep 2008 | 12:16 PM ET
The Constellation Energy building is photographed Monday, Dec. 19, 2005, in Baltimore. Energy supplier FPL Group Inc. is buying rival power-plant operator Constellation Energy Group Inc. for more than $11 billion in stock in a deal announced Monday that would create one of the nation's biggest electricity conglomerates. (AP Photo/Gail Burton)
Gail Burton
The Constellation Energy building is photographed Monday, Dec. 19, 2005, in Baltimore. Energy supplier FPL Group Inc. is buying rival power-plant operator Constellation Energy Group Inc. for more than $11 billion in stock in a deal announced Monday that would create one of the nation's biggest electricity conglomerates. (AP Photo/Gail Burton)

Electricitie de France's management is "mixed" on continuing its challenge to Warren Buffett's "bargain buy" of Constellation Energy, now that the Baltimore company's board has recommended a sale to Berkshire Hathaway subsidiary MidAmerican Energy.

That's according to Dow Jones this morning, although the wire service quotes a source as saying EDF's bid is "still valid." According to that source, "In the end, it'll be up to (Constellation) shareholders to decide. EDF hopes they'll opt for the best price."

(Some shareholders suits have already been filed against Constellation challenging the deal's price.)

EDF has revealed that last week it teamed with the private equity firms Kohlberg Kravis Roberts and TPG Capital to make a bid of $35 a share for Constellation. That's $8.50 more than the $26.50 Constellation agreed to in its quickly-arranged deal with MidAmerican.

EDF already owns almost 10 percent of Constellation and is a joint venture partner in the construction of four new nuclear power plants.

Both MidAmerican and Constellation are offering an immediate injection of $1 billion for Constellation, which has seen its stock badly roughed up by the current credit crisis.

Current price:

But in a conference call, Constellation Chairman & CEO Mayo Shattuck called the MidAmerican deal "the best overall solution for all our stakeholders."

One factor: U.S. regulations against foreign ownership of Constellation's five existing nuclear power plants.

Buffett's strong reputation also played a big part in the calculation. According to Shattuck, "Regardless of how you might interpret the various sources of a billion dollars of equity, there was no question in our minds that the billion dollars of equity coming from this source (Berkshire), with this backing and this history, meant a lot more than it would have in some other cases."

The WSJ's Deal Journal calls it the "power of Buffett. Nothing soothes like Buffett's involvement. In a volatile world, he is as close to a sure thing as the finance world sees."

Current Berkshire stock prices:

Class A:

Class B:

Questions? Comments? Email me at buffettwatch@cnbc.com

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