The last-minute collapse of the 12 billion pound sale of British Energy to EDF raises the question of how well banks behind the deal were plugged in with major shareholders, who ended up vetoing the acquisition.

Having worked on a sale for months, banks were told by private shareholders EDF’s bid of around 775 pence per share was too low. The news clearly left all the parties in disarray.

Such deals are always risky, but the withdrawal of major British Energy shareholders after months of haggling over the price suggests a full-blown row. After all, an indication of where the price was heading had been floating around for at least a week.

A source told Reuters that British Energy shareholder Invesco was involved in the decision. Prudential was another, according to media reports. Merrill Lynch advised EDF, while Rothschild advised British Energy and UBS the British government, a major shareholder in the nuclear generator.

If a deal cannot be revived, British Energy has said it will look for partnerships with other companies. Some even think Britain’s Centrica may now renew its plans to bid for British Energy, which is 35-percent owned by the British government.

A dramatic last-minute hitch to plans for France’s EDF to buy British Energy leaves managements, shareholders and especially the British government in a quandary.

It was a 12 billion pounds ($24 billion) deal that was supposed to relaunch Britain’s nuclear energy programme. Everyone had been told to expect it. In fact, the collapse of talks came too late for French newspapers, several of which had been briefed on the deal and splashed it prominently on their front pages on Friday.

In end, however, big insitutional investors persuaded British Energy to reject EDF’s offer as low-ball, despite the best endeavours of the British government, with a 35-percent stake. 

So what happens next? Talks are continuing and British business minister John Hutton says he remains convinced an EDF takeover makes sense; yet the gulf between the EDF and British Energy boards on price is clearly substantial. British Energy says there can be no certainty of any deal.

It is yet another headache to spoil Prime Minister Gordon Brown’s summer holiday, as his popularity slumps to a record low .

(Reuters photo: A sign is seen on the security fence of British Energy’s Heysham nuclear power station)