I've been remiss in not following M&A news as closely as I ususally do. On Sept. 19, Constellation Energy Group agreed to be acquired by Berkshire's MidAmerican Energy Holdings for $26.50 per share. The whole deal is worth $4.7B, although if you include the $1B cash infusion that MidAmerican offered the per share price should be about $32. Emphasis on should be, because Constellation's ongoing financial problems mean that the $1B in cash will have to go to pay immediate expenses. MidAmerican is still conducting due diligence but the chances of this deal falling apart are slim IMHO, because Uncle Warren doesn't like passing up bargains.
I doubt that Constellation's board will seriously consider the competing $35/share offer from Electricite de France SA, given the regulatory difficulties it would entail.
My play? I'm selling uncovered Jan 09 calls at 35, effective tomorrow. I'm sticking with MidAmerican's valuation of CEG at $26.50 and betting no other U.S.-based suitor will come calling. I had originally intended to sell Oct calls at 30, but I figured I'd take the longer expiration in case Uncle Warren raises his bid to placate shareholders who'd prefer EDF's higher offer.
Nota Bene: Anthony J. Alfidi holds uncovered calls on CEG.
I doubt that Constellation's board will seriously consider the competing $35/share offer from Electricite de France SA, given the regulatory difficulties it would entail.
My play? I'm selling uncovered Jan 09 calls at 35, effective tomorrow. I'm sticking with MidAmerican's valuation of CEG at $26.50 and betting no other U.S.-based suitor will come calling. I had originally intended to sell Oct calls at 30, but I figured I'd take the longer expiration in case Uncle Warren raises his bid to placate shareholders who'd prefer EDF's higher offer.
Nota Bene: Anthony J. Alfidi holds uncovered calls on CEG.
