Constellation Energy’s top executive and the company’s prospective owner said Monday they expect a smooth approval process, and discounted a third party possibly cutting in on the deal.
In regulatory filings Monday, French firm Electricite de France, in conjunction with private equity firms Kohlberg Kravis Roberts & Co. and TPG Capital, was prepared to offer $35 per share for Baltimore-based Constellation, more than the $26.50 offered by Warren Buffett’s MidAmerican Energy Holdings Co. in a deal signed Friday.
Though MidAmerican’s offer was lower, Constellation Energy Chairman, President, and Chief Executive Officer Mayo Shattuck pointed to the speed with which a partner had to be found, and the importance of a smooth regulatory approval process, which he said MidAmerican could provide.
“I am positive that [EdF] are not happy about the developments from the simple point of being a 9.5 percent shareholder,” Shattuck said. “That said, the events of last week put us in a position where we had to look for the most superior offer.”
Shattuck said MidAmerican has a history of successfully executing merger deals, which he said would help push through its latest acquisition.
In a conference call with analysts Monday, Shattuck detailed the wild previous week that led to the company’s $4.7 billion sale to MidAmerican. The Iowa company is controlled by super-investor Warren Buffett.
Constellation was caught up in a crisis of confidence that swept Wall Street this past week and put its all-important credit rating, the key to its energy commodity trading business, in jeopardy. As the company’s stock value plunged, it found a partner to boost its sagging finances.
On Monday, MidAmerican was transferring $1 billion in equity to Constellation as part of its purchase agreement.
“As the last week unfolded, the combination of several issues placed the company in an extremely difficult situation,” Shattuck said. “The context of this very dramatic week ended up putting us in a very good place … but a very necessary place, at the end of the week.”
Shattuck touted Constellation’s improved relationship with the state Public Service Commission, including a settlement earlier this year that ended a state investigation into the company.
In 2006, Constellation canceled a $28 billion merger with Florida Power and Light Co. after failing to satisfy state regulators.
MidAmerican President and CEO Gregory Abel said the company planned to keep Constellation’s local employees and holdings, including subsidiary Baltimore Gas and Electric Co.
“We do believe that utility companies have to be locally run,” he said. “[BGE] has a rich tradition of more than 200 years, and we look forward to seeing that continue.”
