In the current market, it's certainly nice to be Warren Buffett. Many companies are looking for cash infusions, and of course, are making calls to the dealmaking guru.
So, recently Buffett reached a deal to purchase Constellation Energy Group (NYSE: CEG), which operates a variety of energy assets such as nuclear power plants, for $4.7 billion. To do this deal, Buffett used his MidAmerican Energy Holdings Co. vehicle, of which Berkshire Hathaway (NYSE: BRK.A) owns 80.5% of the common stock.
As should be no surprise, Buffett wasn't the only player interested in the deal. In fact, KKR, TPG and Electricité de France (EdF) made a bid for Constellation as well and were actually willing to offer 32% more.
But Constellation rejected the bid.
Not long ago this would have been an attractive bid, but in light of the credit crunch and botched deals, private equity firms have gotten a black eye.
Regulatory approval is also problematic, especially with the involvement of French based EdF. Although, Buffett has a track record as a long-term investor, which should allay fears.
Besides, Buffett quickly invested $1 billion into Constellation so as to stabilize things as the recent financial turmoil wreaked havoc on the company. In other words, he has a lot of leverage in this deal – even if rivals put together much higher bids.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
9-23-2008 @ 9:45AM
Ben Walker said...
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Frank is the head stock picker for Freedom Road Trading.com. He will talk Friday Sept 26 at 9am on how to prosper in the current market. You can attend the class given by teleconference free of charge. Go to www.freedomroadtrading.com for sign up and dialing instructions.
9-23-2008 @ 3:28PM
jo said...
WARREN SELL CARMAX. NEVER SHOULD HAVE PURCHASED THIS CAR SALES COMPANY I TOLD U THIS RIGHT AFTER I HEARD YOU PURCHASED IT.
9-23-2008 @ 8:41AM
Dan Barnett said...
Associated Press reports that French company, EDF, is offering $35 a share.
What do you think?