NEW YORK (The Deal) -- In the latest of a wave of utility mergers, Chicago giant Exelon (EXC) announced Wednesday it is picking up Pepco Holdings (POM) for $6.8 billion in cash, making it the top player along the mid-Atlantic.
The combination of Exelon's BGE in Baltimore, ComEd in Chicago and PECO in Philadelphia with Pepco's Atlantic City Electric in New Jersey, Delmarva Power in Delaware and Pepco in Washington, D.C., will serve 10 million customers with a rate base of $26 billion and further expand Exelon's regulated holdings, ensuring a balanced earnings mix as power prices recover, Exelon said.
The purchase works out to $27.25 per share, nearly a 20% premium over its closing price Tuesday of $22.79. Exelon said it anticipates the acquisition being "significantly" accretive to its adjusted earnings in the first full year after closing.
"Exelon and Pepco Holdings have a compelling strategic rationale for merging, given our geographic proximity and similar utility business models," Exelon CEO and president Chris Crane said in a statement. "Our cultures are an excellent match, with a shared focus on operational excellence, environmental stewardship, customer service and support for the communities we serve."
Pepco chairman, CEO and president Joseph Rigby said in a statement that Exelon has committed to provide what its customers most want: Investments in infrastructure improvements, philanthropy in its communities ($50 million over 10 years) and direct customer benefits of $100 million, or around $50 per customer, for rate credits, low-income customer assistance and energy efficiency measures. He added that Pepco also will benefit from being part of large urban utilities with a good emergency response record during major storms.