With a credit crisis threatening its very existence, Baltimore's Constellation Energy Group agreed yesterday to be sold to Warren Buffett's MidAmerican Energy Holdings for $4.7 billion - about half the company's value a week ago.
The development marked a stunning decline for Constellation, one of only two Baltimore-area Fortune 500 companies. And it came amid a Wall Street meltdown that emerged last weekend with the fall of Lehman Brothers and quickly spread panic among investors.
Consellation came under extraordinary pressure as investors lost confidence in the company's ability to access cash and credit to fund its business. In three days, Constellation's stock lost nearly 60 percent of its value. As a result, the parent of Baltimore Gas & Electric was forced over the course of 48 hours to seek a partner with deeper pockets.
Under the proposal, MidAmerican will provide Constellation with $1 billion immediately to avert a potentially fatal credit rating downgrade.
"MidAmerican was wise enough to, in effect, come to the rescue and offer their help with respect to keeping this company from running out of commercial ability," Mayo A. Shattuck III, the chairman and chief executive of Constellation, said in a brief interview yesterday.
Under the deal, Des Moines-based MidAmerican will pay $26.50 a share for Constellation - a little less than $5 billion. That contrasts with Constellation's failed $12.4 billion merger with Florida's FPL Group nearly two years ago. The deal failed amid political debate in Maryland over deregulation and rising electricity rates.
MidAmerican is controlled by Buffett's Berkshire Hathaway, a conglomerate based in Omaha, Neb. MidAmerican, which has roughly 20,000 megawatts of generation capacity, owns electricity and gas companies in the Midwest and the West Coast, including PacifiCorp, as well as U.S. pipeline companies and electricity distribution companies in Great Britain.
The acquisition likely means few changes for customers of BGE, which is regulated by the state.
"We're very excited to be in this community, and clearly we see Constellation Energy continuing as it has," said Gregory E. Abel, MidAmerican's president and chief executive officer.
He said MidAmerican is committed to letting Constellation operate independently. It is one of the area's largest employers, with 10,200 employees at the end of last year, including more than 6,700 in Maryland. Abel did not directly address the potential impact on Constellation's work force.
