Constellation Energy Attracts $4.7 Billion Bid From Buffett

Constellation Energy (CEG) tentatively agreed Thursday to a $4.7 billion buyout from a company owned by Berkshire Hathaway (BRK.A).

MidAmerican Energy Holdings will pay $26.50 in cash for each outstanding share of Constellation Energy. A definitive deal is expected to be signed by the close of business Friday, at which time Constellation will issue $1 billion of preferred equity, with an 8% yield, to MidAmerican.

The deal, which has been approved by both companies' boards, is expected to close in May 2009.

"The financial services sector and energy commodity markets have witnessed unprecedented volatility," said Constellation Energy CEO Mayo Shattuck. "Backed by the significant industry expertise and financial stability of MidAmerican and Berkshire Hathaway, Constellation Energy will build on its reputation as a first-choice energy solution provider for our many customers," he said.

Baltimore-based Constellation just yesterday announced it had retained Morgan Stanley and UBS to help it evaluate its strategic alternatives as its share plummeted sharply along with the financial-sector crisis.

Just this morning Citigroup downgraded Constellation from buy to hold, noting its that while its credit facility remains in effect, strategic alternatives are just as likely to dilute current investors as result in a sale of the company.

"MidAmerican is very comfortable with, and committed to, Constellation Energy's current strategic plan," said Gregory Abel, CEO of Des Moines-based MidAmerican. He said Constellation Energy will continue to "operate autonomously as it pursues its long-term goals."

Constellation Energy owns 83 generating units throughout the U.S., totaling about 9,000 megawatts of generating capacity. The company delivers electricity and natural gas through the Baltimore Gas and Electric Co., generating revenue of $21 billion last year.

Shares of Constellation Energy were edging up 11 cents, or 0.4%, to $24.88. The stock, which was trading some 30% just last Friday, has traded between $13 and nearly $108 over the past 52 weeks.

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