Just when it appeared that MidAmerican Energy Holdings Co.’s acquisition of Constellation Energy Group would be a smooth transaction, Electricte de France (EDF) International SA, the largest power producer in Europe, has offered to acquire Constellation Energy for $8.50/share more than what Berkshire Hathaway’s MidAmerican Energy has bid. But MidAmerican Energy did not see the rival bid as a setback.

“We’re pleased that Constellation Energy believes that MidAmerican Energy Holdings’ offer is superior and we look forward to quickly closing the transaction,” said MidAmerican Energy spokeswoman Ann Thelen. NGI calls to Constellation Energy were not returned.

In a filing with the Securities and Exchange Commission (SEC) Monday, EDF International, a subsidiary of EDF SA, said it submitted to Constellation Energy’s board of directors Friday a joint offer of $35/share, together with Kohlberg Kravis Roberts & Co. LP and TPG Capital LP.

MidAmerican Energy last Thursday reached a definitive agreement to buy all of the outstanding shares of Constellation Energy for $4.7 billion, or $26.50/share (see Daily GPI, Sept. 19). Constellation Energy’s board has not yet responded to EDF’s offer, the French energy company told the SEC. Constellation is the parent of Baltimore Gas & Electric and the nation’s largest wholesale power seller and major natural gas supplier.

The terms of EDF’s proposal for Baltimore based-Constellation Energy included an immediate investment of $1 billion Monday in exchange for preferred stock convertible to 10.4% of Constellation voting equity and 5.6% of nonvoting equity convertible to voting equity; and 2) $750 million of 10% senior notes, EDF International said.

“The other terms and conditions of the proposal request were either the same as or in the aggregate more favorable to Constellation than the terms and conditions of the preferred stock investment proposed by MidAmerican and announced” by the two companies last Thursday, EDF said in its SEC filing.

Moreover, “the proposal request offered the immediate commencement of negotiations of a merger agreement to acquire all of the outstanding capital stock of Constellation at a price of $35/share and that such negotiations would be completed to permit execution of a definitive merger agreement by Oct. 9…EDF [International] as a shareholder believes that the MidAmerican transaction does not provide adequate value to its shareholders,” EDF International said.

EDF announced earlier this month that it increased its stake in Constellation Energy to 9.51% (almost 17 million shares) from 4.9%. EDF and Constellation Energy have a joint venture to build and develop nuclear power stations.

Meanwhile, MidAmerican Energy was expected to complete a $1 billion investment in Constellation Energy Monday as part of its bid to acquire the energy company. MidAmerican will receive 8% convertible preferred stock of Constellation Energy in exchange for the $1 billion transaction, Constellation said in an SEC filing Monday.

The cash infusion comes only days after white knight MidAmerican brokered a deal to buy Constellation Energy. Following the Lehman Brothers bankruptcy last Monday, which prompted fears that Constellation could lose its credit lines, shares of Constellation went into a free fall last week. News of the acquisition last Thursday appeared to mostly halt the assault on the company’s stock value. The company’s stock closed up Monday at $27.20/share.

Upon the completion of the merger, Constellation Energy will become a wholly owned subsidiary of Des Moines, IA-based MidAmerican, the SEC filing said.

The combination of MidAmerican Energy and Constellation Energy would create a natural gas shipping giant, according to a new report from Bentek Energy. “Assuming MidAmerican Energy Co. acquires Constellation as announced, the combined company will become the third largest pipeline capacity holder in the U.S.,” the research an analysis firm wrote in its Capacity Tracker report. Constellation, the shipper with the most interstate pipeline transportation contracts with 289, has a total contract maximum daily quantity of 1.6 MMDth/d. MidAmerican Energy has 42 contracts also with a total contract maximum daily quantity of 1.6 MMDth/d, the Golden, CO-based firm found.

The completion of the merger is subject to the satisfaction or waiver of specified closing conditions, including the approval of the merger by the holders of a majority of the outstanding shares of Constellation Energy; receipt of the required regulatory approvals; expiration or termination of the waiting period under the Hart-Scott-Rodino antitrust law; the absence of the occurrence of a material adverse effect from the date of the merger agreement; all unsecured senior debt of Constellation being rated investment-grade or better with no less than a stable outlook by the three credit ratings agencies; and several other conditions.

In addition to the Federal Trade Commission’s antitrust approval, the transaction will require the approval of several other agencies: the SEC, the Federal Energy Regulatory Commission, Nuclear Regulatory Commission, the Maryland State Department of Assessments and Taxation, the Maryland Public Service Commission and the Federal Communications Commission, according to the SEC filing.

MidAmerican can terminate the merger agreement within 14 days if MidAmerican determines that since June 30 either the retail and/or wholesale businesses or assets of Constellation and its subsidiaries and joint ventures have materially deteriorated. The parties agreed that an adverse change in the net economic values of Constellation’s businesses or assets in excess of $200 million from June 30 would be deemed material.

In the event of the termination of the merger (other than in the case of the exercise by MidAmerican of the limited due diligence termination right or a termination by Constellation as a result of a breach of the agreement by MidAmerican), Constellation would be required to pay MidAmerican a termination fee of $175 million, according to the SEC filing.

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