More questions than answers continued to swirl around the messy acquisition of Constellation Energy Group as shareholder lawsuits mounted over the board of directors’ choice of suitors. The company’s board chose MidAmerican Energy Holdings’ $4.7 billion ($26.50/share) offer and has spurned EDF International’s (EDFI) $6.2 billion ($35/share) offer.

On Wednesday the Shuman Law Firm said it is investigating the proposed acquisition. The firm said Constellation’s failure to respond to EDFI’s offer “may result in damage” to Constellation shareholders by impeding the maximization of shareholder value. The firm, like many others, is seeking to represent Constellation common stockholders against the company.

At least five other shareholder lawsuits have been filed in Baltimore City Circuit Court, claiming that Des Moines, IA-based MidAmerican’s offer did not reflect the true value of Constellation, parent of Baltimore Gas & Electric and the nation’s largest wholesale power seller and major natural gas supplier (see Daily GPI, Sept. 24).

EDFI said earlier this month that it increased its stake in Constellation to 9.51% (almost 17 million shares) from 4.9%. EDFI and Constellation also have a joint venture to build and develop nuclear power stations. In reporting that Constellation has not responded to its offer, EDFI said that as a shareholder of Constellation it “believes that the MidAmerican transaction does not generate value creation expected by shareholders.” Further, EDFI said it “remains committed to pursuing opportunities in the U.S. nuclear industry and is reviewing all of its options with respect to increasing the value of its investment in Constellation for itself and Constellation’s other shareholders.”

In a conference call earlier in the week, Constellation CEO Mayo A. Shattuck III said the MidAmerican bid was the best available and was more likely to win a quick approval from regulators. MidAmerican, which is owned by Warren Buffett’s Berkshire Hathaway, contributed $1 billion in equity on Monday to prop up Constellation’s trading business.

Hopes of smooth and speedy regulatory reviews could be dashed if history is any predictor. After 10 months of wrangling, FPL Group Inc. and Constellation called off their $31 billion merger in October 2006, several months after it became clear that the companies faced a protracted battle with Maryland legislators and regulators over the transaction (see Daily GPI, Oct. 26, 2006). The cancellation of the FPL-Constellation merger followed a similar breakup of the Exelon-Public Service Enterprise Group merger in September 2006 (see Daily GPI, Sept. 15, 2006). State regulators and legislators recently have become more aggressive in demanding rate concessions from energy companies because of rising energy costs. Citing “insurmountable hurdles” at the New Jersey Board of Public Utilities, Exelon and PSEG gave formal notice of termination of their merger nearly two years after the deal was first announced.

The completion of the MidAmerican-Constellation merger is subject to the satisfaction or waiver of closing conditions, including the approval of the merger by the holders of a majority of the outstanding shares of Constellation; receipt of required regulatory approvals; expiration or termination of the waiting period under the Hart-Scott-Rodino antitrust law; the absence of any 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 the Securities and Exchange Commission (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.

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