Market Overview

Power Up: Exelon Agrees To Purchase Pepco for A Near 30 Percent Premium

Power Up: Exelon Agrees To Purchase Pepco for A Near 30 Percent Premium

Exelon (NYSE: EXC) on Wednesday offered to purchase Pepco (NYSE: POM) for $27.25 a share, a near 30 percent premium to the average price of Pepco over the previous 20 days.

Exelon is one of the nation's largest energy providers with business activities in 47 states and Canada. The company generates more than 35,000 megawatts of owned capacity with 2013 revenues of approximately $24.9 billion.

Pepco provides around two million customers mostly in the Eastern U.S. with regulated electricity service.

The all-cash transaction, unanimously approved by the board of directors of both companies, will create the leading Mid-Atlantic electric and gas utility company.

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The combined entity will serve approximately 10 million customers and create a “compelling strategic rationale for merging, given our geographic proximity and similar utility business models,” according to Exelon President and CEO, Chris Cane.

“This combination provides significant benefits for all of our stakeholders, including customers, employees and shareholders,” said Pepco' President, Chairman and CEO, Joseph M. Rigby. “Exelon is one of the most respected energy companies in the country, and it is committed to building on the progress our team has made over the last few years to improve system reliability and customer satisfaction.”

Crane will retain his CEO title of the newly-created entity, which is still subject to approval by Pepco shareholders. Rigby will remain with Pepco until the transaction is completed, at which point Rigby will step down as part of a previously planned retirement.

The acquisition is expected to be “significantly” accretive to Exelon's adjusted earnings in the first full year after the transaction is completed.

Shares of Pepco surged to new 52-week highs of $26.89 Wednesday morning, trading at a slight discount to the proposed $27.25 buyout price.

Shares of Exelon are trading lower by four percent in Wednesday afternoon's session.


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