Friday, December 19, 2008

Warren Buffet Still Gets P-A-I-D By Constellation

Electricite de France (EdF) won the war for Constellation with Warren Buffet's MidAmerican Energy Group, but he gets a king's ransom for his deal being rebuffed. Constellation, like many utilities, had been weakened over the past few years by a combination of frozen retail rates due to (botched) deregulation. They were also weakened by heavy borrowing for stock speculation on commodities. Buffet's $1 billion bailout check that came with his initial buyout offer saved Constellation from bankruptcy. That is how he convinced Constellation to take his bid for shares [$26.50 a share] that was lower than the EdF share offer.

For cancelling the MidAmerican deal Constellation has to now pay Buffet a $175 million "termination" fee, $418 million in cash, plus Constellation stock worth about $460 million. That is $1.05 billion for less than four months work - an annual rate of return above 300 percent. Buffet also gets back his original $1 billion investment. Constellation stock began 2008 at $100 and closed yesterday at $23. Although the Center opposed Buffets deal and supported the EdF offer, we hope he will not hold it against us. With that four month 300 percent return, he can still feel free to press our Donate button. (, 12/19/08)

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