Exelon Corp. and Pepco Holdings Inc. announced on April 30 that they have reached an agreement to combine the two companies.
Assuming all approvals are received, Exelon will acquire Pepco in an all-cash deal valued at $6.83 billion, which represents a 24.7% premium to the volume-weighted average share price over the last 20 trading days ending April 25.
Exelon operates the largest fleet of nuclear plants in the nation. The fleet consists of 23 reactors at 14 locations in Illinois, Maryland, Nebraska, New Jersey, New York, and Pennsylvania. With headquarters in Chicago, the company owns more than 35 GW of generating capacity. Its Constellation business unit provides energy products and services to over 1.1 million customers while its utilities—Baltimore Gas and Electric Co., ComEd, and PECO—deliver electricity and natural gas to another 6.6 million more.
Pepco is one of the largest energy delivery companies in the Mid-Atlantic region, serving about 2 million customers. Through its subsidiaries—Pepco, Delmarva Power, and Atlantic City Electric—it has operations in Delaware, the District of Columbia, Maryland, and New Jersey.
“The geographic fit of Pepco utilities within the Exelon utilities is second to none. There is a natural overlap of our operations in the Mid-Atlantic,” Chris Crane, president and CEO of Exelon, said during a conference call announcing the acquisition.
Crane will remain president and CEO of the combined company. Joseph M. Rigby, chairman, president, and CEO of Pepco, who had previously announced his planned retirement, will remain in his current roles with Pepco until the closing of the transaction, which is anticipated to occur in the second or third quarter of 2015.
The transaction will further expand Exelon’s regulated holdings with the combined utility businesses having a rate base of approximately $26 billion. The financing is expected to include about 50% debt and the remainder via issuance of equity—including mandatory convertibles—and up to $1 billion of cash from non-core asset sales, subject to market conditions.
“We think this deal is the right deal at the right time for Exelon. This is a strategic acquisition that results in a leading Mid-Atlantic electric and gas utility platform with a contiguous footprint that will serve almost 10 million customers in six states,” Crane said.
—Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)