Constellation sets meeting to OK deal

Shareholders to vote Dec. 23 on $4.7 billion sale to Buffett

November 26, 2008|By Hanah Cho | Hanah Cho,hanah.cho@baltsun.com

Constellation Energy Group, which is selling itself to Warren Buffett, will seek shareholder approval late next month for its pending $4.7 billion deal.

The company, which owns Baltimore Gas & Electric Co., announced yesterday that a special shareholder meeting would take place in Baltimore on Dec. 23.

Constellation agreed to sell itself in mid-September to Buffett's MidAmerican Energy Holdings Co. as it faced a liquidity crisis amid a financial sector meltdown. The Des Moines, Iowa-based MidAmerican agreed to pay $26.50 a share, about one-fourth of Constellation's market value at the beginning of the year.

Constellation spokesman Rob Gould said yesterday that executives will be meeting with institutional and retail shareholders in the next few weeks to argue that the deal is the best alternative for the company and its stockholders. Many analysts expect shareholders to approve the deal, despite some concerns about the price.

Shareholders have filed more than a half-dozen lawsuits against Constellation and management, saying it accepted too low a bid for the company. And some have questioned whether the deal is necessary if Constellation successfully raises cash through asset sales and reduces its exposure to its risky commodities trading operations - moves the company is undertaking now.

"It's far from a done deal. We have no idea if shareholders will approve it," said Democratic Sen. Jim Rosapepe of Prince George's County, who believes the deal is not in the best interest of Maryland ratepayers.

Federal and state regulators also must approve the deal.

The Maryland Public Service Commission, which plans to make a decision by April 15 about the sale, said it would take a broad look at the deal's impact on ratepayers, including weighing arguments about whether a "concrete and viable" alternative buyer would be a better choice.

In choosing MidAmerican, Constellation's board of directors rejected a proposal from its largest shareholder, Electricite de France, and two private equity firms. The group made a higher $35-a-share bid for the company. But Constellation executives said MidAmerican's offer was the superior one in part because of Buffett's stabilizing effect on a skittish market and the likelihood of easier regulatory approval.

In 2007, the state-controlled French company teamed up with Constellation in a joint venture called UniStar to build nuclear reactors in the United States. The agreement allows EDF to acquire up to 9.9 percent in Constellation's outstanding shares during the next five years; EDF currently has a 9.5 percent stake.

Moreover, EDF is required to vote its shares as "recommended by the Constellation board of directors," according to the agreement.

But EDF, which decided last month not to submit a new offer, has a voice in the PSC case as an intervening party. The company hired two Washington law firms, including attorney H. Russell Frisby Jr., the former chairman of the PSC in the mid-1990s, for the state regulatory review process.

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