Buffett's New Buyout Battle

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.