Constellation Energy
(
CEG
) and
Exelon Corporation
(
EXC
) announced that the Maryland Public Service Commission or MPSC
approved their merger. The MPSC's order adds new conditions, but
retains many of the terms of the settlement reached in December
2011 by the companies, the State of Maryland, the Maryland Energy
Administration, the City of Baltimore and the Baltimore Building
and Construction Trades Council.
Per the agreement, the merger will provide a package of benefits
for Maryland, the City of Baltimore and BGE customers totaling more
than $1 billion and is expected to create more than 6,000 jobs
statewide.
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.
Headquartered in Chicago, Exelon is one of the nation's largest
electric utilities with approximately $19 billion in annual
revenues. The company has one of the industry's largest portfolios
of electricity generation capacity, with a nationwide reach and
strong positions in the Midwest and Mid-Atlantic. Exelon
distributes electricity to approximately 5.4 million customers in
northern Illinois and southeastern Pennsylvania and natural gas to
approximately 494,000 customers in the Philadelphia area.
This merger will create the nation's premier competitive energy
products and services supplier in terms of load and customers as
well as the biggest competitive power generator with the largest
nuclear fleet in the U.S. The consolidated entity will also produce
power at much lower costs. The merger will also enable them to
jointly work on fuel innovation, increase efficiency and provide
better options and rates to customers.
The Exelon-Constellation merger has received approval from the
shareholders of Exelon and Constellation. Required regulatory
approvals or reviews have been completed by the New York Public
Service Commission, the Public Utility Commission of Texas, the
Department of Justice, and the Nuclear Regulatory Commission.
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 Company 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.
Constellation Energy is a leading competitive supplier of power,
natural gas and energy products and services for homes and
businesses across U.S. It owns a diversified fleet of generating
units, totaling approximately 12,000 megawatts of generating
capacity, and is a leading advocate for clean, environmentally
sustainable energy sources, such as solar power and nuclear energy.
The company delivers electricity and natural gas through Baltimore
Gas and Electric Company, its regulated utility in Central
Maryland.
In the near term, given the merger pending approval with the
Federal Energy Regulatory Commission and weak numbers posted by
Constellation Energy in the recently reported fourth quarter of
2011, we are maintaining our Zacks #5 Rank (short-term Strong Sell
rating) on the stock. This implies that the stock is expected to
perform below par the broader U.S. equity market over the next 1-3
months. We are, however, Neutral on Constellation Energy in the
long term.
CONSTELLATN EGY (
CEG
): Free Stock Analysis Report
EXELON CORP (
EXC
): Free Stock Analysis Report
NEXTERA ENERGY (
NEE
): Free Stock Analysis Report
NRG ENERGY INC (
NRG
): Free Stock Analysis Report
PUBLIC SV ENTRP (
PEG
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research