(By Mayur Pahilajani - iStockAnalyst Writer)

New York, NY - Billionaire Warren Buffett is in the ring with the world's largest operator of atomic reactors, Paris-based Electricite de France SA (EDF),  to purchase stake in Constellation Energy Group Inc. (NYSE: CEG).

EDF on Wednesday proposed that it is prepared to pay $4.5 billion for half of Constellation's nuclear generation and operation business in addition to an option of selling up to $2 billion of non-nuclear generation assets to the French company.

The offer by EDF represent $52 per share or 96 percent premium to proposed offer by Buffett’s MidAmerican Energy Holdings Co. as Constellation agreed earlier this year to sell all of its shares to the later purchaser. MidAmerican had offered $26.50 per share or $4.7 billion to Constellation.

“As Constellation’s largest stockholder, EDF has long admired and been a committed partner to the Company,” Pierre Gadonneix, chairman and chief executive officer of EDF, said in a statement on Wednesday. EDF owns 9.5 percent of Constellation's total stake.

He added, “Constellation is fundamentally strong and EDF, like many others, believes that the proposed MidAmerican transaction significantly undervalues Constellation and its future opportunities” The stock of EDF tumbled by more than 6 percent in Paris trading after the news was released.

EDF has also sweetened the offer by proposing up-front $1 billion of cash investment in Constellation. The Paris-based company has been trying to gain generating capacity in the U.S. with the deal that could close in six to nine months. The closing period would depend on Constellation’s decision to terminate its proposed transaction with MidAmerican Energy and execution of a definitive agreement with EDF.

Constellation, which is a Fortune 125 company with 2007 revenues of $21 billion, said that its Board of Directors will review the "multi-faceted proposal,...as soon as practicable in a manner consistent with its fiduciary responsibilities to shareholders, as well as its responsibilities under its definitive merger agreement with MidAmerican Energy Holdings Company."

Constellation added that it has not withdrawn, modified its recommendation that shareholders of Constellation Energy vote in favor of the merger with MidAmerican. The special meeting of shareholders to vote on the merger with MidAmerican is scheduled for Dec. 23.

The market analysts estimate that if Constellation decides to terminate its deal with MidAmerican, it would have to shell out $593 million in cash, which would be in addition to issuing of 9.9 percent or 20 million of its outstanding stock. The company would also require giving up as much as $1 billion in 14 percent senior notes to Buffett’s company, which would be repaid in Dec. 2009 following shareholders' vote.

“We are confident that the terms of our proposal are demonstrably superior to those of the MidAmerican transaction," Gadonneix said. "In addition to providing Constellation stockholders with an opportunity to realize the value of their investment in the Company, our proposal provides more than sufficient liquidity to allow Constellation to remain a strong, standalone public company."

Shares of Constellation soared by a much as 20 percent to $30.17 in composite trading on the New York Stock Exchange on Wednesday. The shares were trading higher by $2.67 or 10.62 percent at $27.82 at 11:44 a.m. Eastern Time. The stock has traded as high as $107.97 and as low as $13.00 in the last 52-week period.