Berkshire Hathaway’s financial backing was key to saving Constellation Energy, which was faced with the very real possibility of declaring bankruptcy, according to the company’s 170-page proxy statement filed late Friday with the Securities and Exchange Commission.
The bankruptcy of Wall Street investment firm Lehman Brothers on Sept. 15 raised concerns about Constellation’s small connection to the firm. Doubts also arose about the company’s liquidity, sending its stock price plummeting more than 70 percent in three days.
At least five potential suitors emerged during that time of strife, including Electricite de France, Constellation’s largest private shareholder at 9.5 percent. MidAmerican representatives reached out to Shattuck on Sept. 16 with an unsolicited offer of $26.50 per share, according to the filing.
That offer was ultimately announced on Sept. 18 as the EdF proposal was caught in a catch-22: The French firm would not invest $450 million in equity unless credit rating companies agreed to not drop Constellation’s rating to junk status, while those agencies would not do so unless they saw new liquidity added to Constellation.
EdF later said its offer of $35 per share for Constellation was spurned by company executives, launching several shareholder lawsuits. But according to the filing, Shattuck was initially against selling the company for MidAmerican’s price, and sought a cash infusion such as EdF offered without resulting to a merger.
Ultimately, Shattuck and other executives relented, as the specter of bankruptcy loomed and threatened to drive shareholders’ return below the $26.50 a share offer, according to the filing.
