Constellation mulls new bid; CenturyTel moves ahead on FCC review; NatCity sale likely despite critic

By Cristal Cody

New York, Dec. 3 - Constellation Energy Group Inc.'s stock jumped 10.14% Wednesday after Electricite de France SA offered to buy half the company's nuclear operations for $4.5 billion.

Investors also were thrilled with merger feedback from Precision Drilling Trust and Grey Wolf Inc. Despite the companies pushing back the shareholders vote to Dec. 23, Grey Wolf shares closed up 24.94%.

Also on Wednesday, CenturyTel Inc. and Embarq Corp. said the companies have filed their merger application for review to the Federal Communications Commission, which will schedule a public comment period.

In other deal news, a Cleveland congressman may not find much luck with his bid to stop the sale of National City Corp. to Pittsburgh-based PNC Financial Services Group Inc.

Meanwhile, the markets made a small rally Wednesday, with the Dow Jones Industrial Average up 2.05% to 8,591.69.

The Standard & Poor's 500 index rose 2.58% to 870.74, and the Nasdaq Composite Index rose 2.94% to 1,492.38.

Constellation mulls new bid

Shares of Constellation Energy rose 10.14% to close at $27.70 Wednesday after the French utility company made a much more attractive counter bid to Warren Buffet's takeover offer.

Electricite de France SA, already a large stockholder with 9.5% of Constellation's outstanding shares, offered to buy 50% of Constellation's nuclear operations for $4.5 billion.

The utility said the offer values the company at about $52 a share, quite a premium to the $26.50 a share offered by Buffet's MidAmerican Energy Holdings Co.

Electricite de France also offered an immediate injection of $1 billion.

Analysts have been bearish on the MidAmerican deal, saying the offer heavily undervalued the Baltimore, Md.-based company.

Constellation agreed to the deal with Des Moines, Iowa-based MidAmerican on Sept. 19 because of a liquidity crisis and the crumbing financial markets.

Constellation Energy said in a statement Wednesday that the board of directors will review the proposal, but it has not withdrawn its recommendation that shareholders vote in favor of the merger.

Shareholders are scheduled to vote on the MidAmerican offer on Dec. 23.

CenturyTel, Embarq deal

CenturyTel said in a regulatory filing that the FCC application to consider the merger with Embarq has been filed.

CenturyTel and Embarq filed the application for consent to transfer of control on Nov. 26.

The FCC will place the application for a public notice and comment period.

FCC spokesman Edie Herman said Wednesday that no comment dates have been set yet.

CenturyTel of Monroe, La., offered to buy Embarq on Oct. 27 for stock initially valued at $5.8 billion.

Embarq shareholders will get 1.37 shares of CenturyTel for each share of Embarq.

The companies said in the regulatory filing that the "key issue for the FCC when considering the application is whether the proposed merger between CenturyTel and Embarq is in the public interest. The filing makes the case that this merger is in the public interest as it will provide benefits to consumers of both companies."

CenturyTel and Embarq expect the regulatory approval process for the merger to start this year across the board, with the review from the U.S. Department of Justice set to expire Dec. 12.

The combination also must be reviewed by state public utility commissions.

Embarq and CenturyTel expect to receive all the necessary approvals to complete the deal within six to eight months and close in the second quarter of 2009.

Embarq shares closed at $32.82, up 5.5% in trading.

CenturyTel shares rose 2.42% to close at $26.65.

Cleveland dreamin'

A late move by a Cleveland Democrat to block the $5.58 billion sale of National City to PNC Financial Services Group probably won't carry enough weight, Gerard Cassidy, an analyst with RBC Capital Markets, said Wednesday.

Rep. Dennis Kucinich said Tuesday he sent a letter to the vice president of the Federal Reserve Bank of Cleveland opposing Pittsburgh-based PNC Bank's acquisition of Cleveland-based National City.

Kucinich asked the Federal Reserve Bank to reject the deal or hold a public meeting or hearing because of concerns over the sale's impact on Cleveland.

National City agreed to the merger in October.

"The banking regulators are looking for safety and soundness of the U.S. banking system and merging these two companies together enhances that safety because of troubles National City has experienced," Cassidy said.

"Though it may be a better alternative in the Cleveland, Ohio marketplace to keep NatCity independent for more jobs - to have this deal break at this time would put more pressure on the banking system and I don't believe the regulators would go for it."

National City shares closed up 7.69% to $1.82.

PNC shares rose 8.6% to close at $46.98 Wednesday.

Grey Wolf vote pushed back

Grey Wolf shares rose 24.94% to close at $5.56 Wednesday, and were up another 1.62% in after-hours trading.

Canadian energy company Precision Drilling Trust and Grey Wolf amended the merger agreement Tuesday and moved the shareholder vote from Dec. 9 to Dec. 23 to allow shareholders more time to consider the amendment.

The companies expect the merger to close soon after the shareholders meeting.

The amendment focuses on convertible notes that are not converted to common stock before the merger.

Michael Mazar, an analyst with BMO Capital Markets, said investors were jumping back into the stock because of news that the deal is still on track despite the shareholders' meeting being rescheduled.

"Yesterday, people still thought the deal was going to fall through so we saw Grey Wolf trading even below the cash portion of the takeover price," he said. "The arb spread is still there, but it's much narrower than it was at the close yesterday."

Precision made the unsolicited bid in June for Houston-based Grey Wolf and the two companies agreed to merge on Aug. 24.

Precision will buy the company for about $1.115 billion in cash and 42 million Precision trust units.

Grey Wolf shareholders will receive $5 in cash and 0.1883 of a Precision trust unit for each share of Grey Wolf common stock.

The companies said that 54% of outstanding Grey Wolf shares had voted as of Tuesday to approve the merger.

All regulatory approvals required for the merger also have been received, the companies said.

Precision shares fell 6.32% to close at $7.12.

Mentioned in this article:

CenturyTel Inc. NYSE: CTL

Constellation Energy Group Inc. NYSE: CEG

Embarq Corp. NYSE: EQ

Grey Wolf Inc. AMEX: GW

National City Corp. NYSE: NCC

PNC Financial Services Group Inc. NYSE: PNC

Precision Drilling Trust NYSE: PDS

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