Dive Brief:
- Exelon has agreed to buy Pepco Holdings for $6.8 billion, according to Bloomberg.
- The all-cash deal values Pepco at $27.25 per share, nearly 25% over Friday's closing price of $21.85.
- Pepco, which operates utilities in Delaware, Maryland, New Jersey and Washington, D.C., serves about 2 million electric and natural gas customers. Pepco has a market valuation of $5.7 billion.
Dive Insight:
After the merger, Exelon's utilities will serve 10 million customers and have a combined rate base of $26 billion. The deal would make Exelon, which already serves the Baltimore and Philadelphia metro areas through Baltimore Gas & Electric and PECO, the largest utility in the Northeast. Exelon is already the third-largest U.S. electric utility by customer base as well as the largest nuclear generator in the country.
“Exelon and Pepco Holdings have a compelling strategic rationale for merging, given our geographic proximity and similar utility business models,” said Exelon CEO Chris Crane.
The deal will grow Exelon's regulated utility operations as part of a "back-to-basics" strategy many utilities are pursuing, driven by flat demand growth and depressed power prices. In agreeing to the deal, Exelon plans to make "investments in infrastructure improvements," said Pepco Holdings CEO Joe Rigby.
The Pepco merger is the latest in a string of M&A activity for Exelon. In 2011, Exelon bought Constellation Energy (owner of Baltimore Gas & Electric) for $7.9 billion. The company agreed to merge with Public Service Enterprise Group in the mid-2000s, but the deal to make Exelon the largest U.S. utility was scuttled at the state regulatory level by consumer interest groups.
The Pepco-Exelon merger will require approval from regulators in D.C., Delaware, Maryland and New Jersey, as well as the Federal Energy Regulatory Commission. It will also have to pass an antitrust review by the Department of Justice and the Federal Trade Commission.
