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
Reader Comments (Page 1 of 1)
9-23-2008 @ 10:40PM
MoNay said...
Warren Buffett would be the wealthiest man in the world but he has donated 50% of his wealth to charities. He was approached to buy Lehman Brothers , but he turned them down. Richard Fuld made 489 million dollars in the past decade as CEO of Lehman Brothers. I would love to hear his solution for this credit crisis.
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