If the shareholders have anything to say about it, Warren Buffett won’t be Constellation Energy’s new owner.
Four Constellation shareholders have filed suit in Baltimore City Circuit Court against the company, alleging executives on Thursday accepted a sale price much lower than the company’s true value amid grave financial troubles.
Those suits could be the first signs of a more widespread shareholder revolt against the $4.7 billion, $26.50 per share sale to Buffett’s MidAmerican Energy Holdings Co., company analysts said. As part of the deal, MidAmerican contributed $1 billion in equity to stabilize Constellation’s balance sheet.
“It’s definitely a threat [to the deal],” said Paul Justice, an analyst with Chicago-based investment research firm Morningstar. “Minority shareholders are obviously angry at the precipitous fall of Constellation’s stock price. But the fact remains at the heat of the moment, when this deal was struck, something needed to be done.”
The suits, filed Thursday and Friday, claim that Constellation’s acceptance of MidAmerican’s offer does not provide, “a sufficient premium over market value,” according to one filing which called the merger a “fire sale.”
Constellation spokesman Rob Gould said the comment could not comment on the suits, due to their status as “pending litigation.”
Yesterday, French energy giant Electricite de France said Constellation had not responded to an offer to purchase the company for $35 per share. Reports Tuesday said EDF, which is 85 percent owned by the French government, was “mixed” on continuing with a counteroffer for Constellation, and appeared willing to let shareholders attempt to derail the deal.
In a conference call with analysts Monday, Constellation chairman, president, and Chief Executive Officer Mayo Shattuck said the company had taken the “most superior officer,” and emphasized the Iowa-based MidAmerican’s success in getting regulatory approval for its mergers. A foreign company might not have such an easy time, Justice said, and the Buffett company was more likely to leave top management intact.
However, to some shareholders, that sounded as if the company’s executives were more concerned with their job security than their fiduciary obligations to stakeholders.
“The Constellation Board of Directors made a hasty deal with MidAmerican, for a price that is less than half what the company is really worth, based on conflicts of interest and incomplete information,” said Donald Enright, an attorney with Washington, D.C.-based Finkelstein Thompson LLP who filed a class-action suit on behalf of Arthur Salzberg of Bethesda and other shareholders.
Justice said the shareholders’ allegations are understandable with the benefit of hindsight, but that at the time of the deal Constellation was fighting for survival.
“Management appear to some shareholders to be protecting their own interest ahead of shareholders,’ ” Justice said. “But the very viability of Constellation was at stake at the moment this deal was struck.”
BGE estimates $110 average increase in winter heating bills
Residential customers who purchase natural gas from Baltimore Gas and Electric Co. can expect a $110 average increase in their winter heating bill, the utility announced Tuesday. Between Nov. 1 and March 31 the average residential customer can expect to pay $792 for heating, up from $682 a year ago, due to the increase in the market price for natural gas, BGE said.
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