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Buffett's New Buyout Battle

By Toby Shute - Updated Apr 5, 2017 at 8:06PM

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France's EDF takes on the Oracle of Omaha in a nuclear tussle.

Who said the French were cheese-eating surrender monkeys?

It appeared back in October that after being rebuffed, Electricite de France -- EDF for short -- had skulked off, leaving MidAmerican Energy, a cornerstone of Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) empire, to scoop up Constellation Energy (NYSE:CEG) for a song. Nevertheless, EDF is back in the fray in a big way, having made a fresh offer for 50% of Constellation's nuclear business.

This is turning out to be the hottest nuclear tussle this side of Exelon's (NYSE:EXC) bid for NRG Energy (NYSE:NRG). When it comes to Constellation, it was always about the nukes. I suspected as much back in September.

EDF's big bid will be hard for Buffett and Co. to beat back. The firm is offering $4.5 billion for the nuclear half-stake, which approaches the price MidAmerican had placed on Constellation's entire business. The proposal includes $1 billion upfront, plus a put option allowing Constellation to sell up to $2 billion of non-nuclear assets to EDF.

Considering the significant growth aspirations of the principals running MidAmerican, I would not expect Berkshire to back down easily. Still, one-upping the EDF offer would change the deal calculus quite drastically, and Buffett's next move will tell us a lot about the remaining margin of safety here.

For Fools thinking about grabbing Constellation shares at this juncture, I would be hesitant unless there's another market meltdown, taking the shares back down to their prior levels. But for those who bought in to the merger arbitrage over the past month or two, congratulations. Now that the bidding war is back in place, additional gains are pure gravy.

Berkshire Hathaway is both an Inside Value and a Stock Advisor selection. Power up any of our subscriber newsletters, including access to all back issues, free for 30 days.

Fool contributor Toby Shute doesn't have a position in any company mentioned, but the Fool owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$304.26 (-0.78%) $-2.39
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$457,277.49 (-0.87%) $-4,022.50
NRG Energy, Inc. Stock Quote
NRG Energy, Inc.
NRG
$42.61 (0.02%) $0.01
Exelon Corporation Stock Quote
Exelon Corporation
EXC
$46.25 (-0.94%) $0.44
Constellation Energy Group, Inc. Stock Quote
Constellation Energy Group, Inc.
CEG

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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