Exelon-CEG Progress on Merger - Analyst Blog

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Exelon Corporation ( EXC ) and Constellation Energy Group Inc. ( CEG ) reached an agreement with Electricite de France or EDF, pursuant to which EDF would withdraw its opposition to the Exelon-Constellation merger. The terms address Constellation Energy Nuclear Group, a joint venture between Constellation and EDF that owns and operates three nuclear facilities with five generating units in Maryland and New York.

Further, Exelon said this merger would combine its environmentally advantaged generation fleet with Constellation Energy's customer-facing businesses. No payment was made by either party with respect to this agreement.

Earlier, on April 28, 2011, Exelon entered into a definite agreement to acquire Constellation Energy, for about $7.9 billion. The exchange ratio agreed upon represents an 18.1% premium to the 30-day average closing stock prices of Exelon and Constellation as of April 27, 2011. Following the completion of the merger, Exelon shareholders will have 78% ownership of the combined company, while the rest will belong to Constellation shareholders. The companies expect to close the merger by early 2012.

Nuclear power plants are the major source of power generation for Exelon. As the deal was finally chalked out, Exelon will have access to Constellation's nuclear power plants in New York and Maryland. This will come as a big boost to its generation capacity.

This merger will create the nation's number one competitive energy products and services supplier by load and customers as well as the biggest competitive power generator having the largest nuclear fleet in the U.S. The consolidated entity will also produce power at much lower costs, helping them to jointly work on fuel innovation, increase efficiency and provide better options and rates to customers.

The Exelon-Constellation merger has received approval by the Department of Justice, the New York Public Service Commission, the Public Utility Commission of Texas and the shareholders of Exelon and Constellation. However, approval is pending from the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and the Maryland Public Service Commission.

Baltimore based Constellation Energy is a supplier of power, natural gas and energy products and services for homes and businesses across the continental United States.

Despite obvious positives to be reaped from such a consolidation, the deal came after both the companies showed a dubious track record of failing to acquire or be acquired by other companies. On a few occasions, Exelon has made unsuccessful attempts to clinch acquisitions. The target companies, for instance, were NRG Energy Inc. ( NRG ) in 2008, Public Service Enterprise Group Inc. ( PEG ) in 2004 and Illinois Power Co. in 2003.

Constellation Energy came close to be acquired twice before both the deals fell through. NextEra Energy Inc. 's ( NEE ) attempt to buy Constellation was thwarted in 2005 by the interference of state officials. Another deal to be acquired by Berkshire Hathaway failed in 2008.

Exelon Corporation currently retains a Zacks #3 Rank (short-term Hold rating). We maintain a longer-term Neutral recommendation on Exelon.

Based in Chicago, Illinois, Exelon Corporation, a utility services holding company, engages in the generation, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CEG , EXC , NEE , NRG , PEG

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