Warren Buffett's bid to buy Constellation Energy Group at a bargain price may have been "challenged" today by a significantly higher offer from Electricite de France, but don't expect a bidding war to break out.
Last September, Constellation was in big trouble. Its stock was under enormous pressure as the Baltimore-based company faced a liquidity crunch that could have put it into bankruptcy.
MidAmerican Energy Holdings, a subsidiary of Buffett's Berkshire Hathaway, came to the rescue with a quick infusion of one billion dollars and a deal to buy the entire company for $4.7 billion, or $26.50 a share. That looked like another "Buffett Bargain," with the stock trading over $100 a share just about 10 months before.
Today, EDF is offering to pay $4.5 billion for 50 percent of Constellation's nuclear business. That's just $200 million less than the price Buffett is paying for the entire company. The French company is also offering an up-front $1 billion cash investment in Constellation and says it's willing to buy another $2 billion of the company's non-nuclear assets.
EDF calculates that its proposal values Constellation at around $52 a share, almost double Buffett's offer. Indeed, EDF argues MidAmerican's offer "significantly undervalues" Constellation. It wants that company's board to drop the Buffett deal and accept its "superior" proposal.