Can Constellation wriggle out of Buffett's embrace?
Saturday's column, in case you missed it:
It's a beautiful idea: Constellation Energy shareholders reject the emergency merger with Warren Buffett's MidAmerican Energy Holdings, retake control of their company and watch the stock head back upward.Baltimore gets to keep a Fortune 500 corporate headquarters.
And Constellation shareholders beat the planet's greatest investor at his own game.
It's not anything that big shareholders are counting on. For now, Buffett's deal is the only thing keeping Constellation stock from plunging even further than it has.
But it's not impossible. Buffett locked up Constellation at such a screaming bargain that shareholders of all stripes are dreaming of a Houdini scenario.
Such an outcome is almost certainly being discussed inside Constellation. ("We look forward to closing the transaction with MidAmerican and building our business," said spokesman Robert L. Gould after I asked.)
Comments
If Buffet's offer is rejected by shareholders, won't Constellation head into bankruptcy? That was nearly the case just before buffets offer. Constallation is 'stuck' paying him a hi rate of return on the shares he bought for $1B... also, did you notice that CEG has suspended its dividend? How will CEG get enough funding to get back on its feet?
Posted by: Alex B. | October 27, 2008 12:39 PM
Hi Alex. They just declared a dividend a week or so ago.
Posted by: Sherman | October 27, 2008 5:57 PM
Sherman; that is definitly true. My mother is a shareholder, and she claimed that a letter sent to her at the same time she received her last dividend check claimed that this was essentially the last check she'd see. Was the last-declared dividend actually the last one that Constellation will declare? As my last post indicated, don't cash-strapped companies usually cancel their dividend? If it were not for Buffett's infusion of cash, wouldn't CEG be at or near bankruptcy?
Posted by: Alex B. | October 28, 2008 9:37 AM