FPL Group has offered to purchase Constellation Energy for $11 billion, a premium of about 10% above its market capitalization as of the day before the offer on December 13, 2005. Today, the first full day of stock trading after the offer was made public, both Constellation and FP&L shares are higher; Constellation’s have increased by nearly 8% while FP&L’s have gone up by less than 1%. However, it is telling that even the purchasing company’s stock increased on the day that it announced a merger; typically that situation results in a brief drop in share prices.
Apparently investors like the synergies that the two companies bring together. Here is an interesting quote from one analyst: (Unfortunately, I cannot provide a link, I found the story on my investment company’s web site. Access requires an account.)
“Constellation’s fleet is about half nuclear and 24% coal. Coal and nuclear plants that have uncontracted capacity have been hugely profitable due to the soaring price of gas, which in many markets sets the price of power. “
Since FP&L’s merchant plants are 57% gas fired, it seems likely that its leaders like Constellation’s nuclear and coal fleet and are probably interested in Constellation’s participation with Areva in the Unistar partnership that plans to build a fleet of new nuclear power plants using a similar design as the plant that Areva is building in Finland.
Disclosure: My father worked for FP&L for more than 35 years, so that company holds good memories for me, especially at this time of year. They gave out great presents for kids at the annual Christmas party, at least in the old days.
