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PSC ruling on Constellation deal due in January

Hearings and discussions over Exelon Corp.’s proposed acquisition of Constellation Energy Group will take more than two months according to state regulators who outlined the process on Tuesday.

The Maryland Public Service Commission held its first hearing on the $7.9 billion all-stock deal and said they anticipate ruling on Jan. 5. The commission said it agreed to start evidentiary hearings into the merger on Oct. 31, the date of Halloween.

“Don’t read anything into that,” PSC Chairman Douglas R. M. Nazarian joked.

The hearings will run for seven full days and two half-days and are scheduled to wrap up on Nov. 10. The public will get a chance to weigh in on the proposed deal at three evening hearings: Nov. 29, Dec. 1 and Dec. 5.

Tuesday’s hearing came a day after Exelon and Constellation made public a 327-page filing with the Securities and Exchange Commission that highlights the case for the merger to the companies’ respective stockholders. The deal needs approval from both companies’ shareholders as well as regulatory agencies at the federal and state level. The companies anticipate closing the deal in the first quarter of 2012.

In the filing, the companies cite multiple potential risks, including the fact there have been 12 shareholder lawsuits filed to stop the deal.

The companies are also facing a legal challenge to the acquisition in the form of a shareholder lawsuit filed in Baltimore City Circuit Court. There had originally been 12 lawsuits filed, but the cases were consolidated in May and one of the actions was dropped, according to the filing.

The lawsuits seek an injunction preventing the merger or the payment of damages. Constellation and Exelon have until July 8 to file a motion to dismiss the lawsuit.

The companies also laid out the potential payouts Constellation executives could get under certain conditions if they were let go after the merger.

“In considering the recommendations of the Constellation board of directors with respect to the merger, Constellation’s stockholders should be aware of the benefits available to the executive officers and directors of Constellation in connection with the merger,” the filing reads. “These individuals have certain interests in the merger that may be different from, or in addition to, the interests of Constellation’s stockholders generally.”

If Constellation Energy Group President and CEO Mayo A. Shattuck III is let go after his company’s acquisition by Exelon, he could receive $1.82 million in severance pay and $1.3 million for the estimated prorated annual incentive payment under his annual incentive plan, according to a filing with the Securities and Exchange Commission.

Additionally, Shattuck would receive an estimated $9.3 million in unvested stock options already earned and cash-based performance payments, according to the filing. Twelve Constellation executives could see a total of $35.9 million in severance and change-of-control payments.

The companies also laid out the benefits to Maryland customers of Constellation if the merger were approved. The companies said the deal would mean a direct investment in the state of more than $250 million — including a $100 rate credit for each Baltimore Gas & Electric Co. residential customer.

The companies also say the acquisition would create nearly 900 jobs in the state related to projects associated with the deal, such as the development of a new or renovated headquarters building for the new company’s energy marketing and renewable development businesses, as well as the development of new renewable energy projects.

The combined company would be called Exelon and would be headquartered in Chicago. But the Constellation name would live on in the new company’s power marketing and retail and wholesale businesses, which would be headquartered in Baltimore. The companies’ renewable energy businesses would also be consolidated and be based in Baltimore.

Shattuck is scheduled to become executive chairman of the merged company.

The companies have already sought approval from the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the New York State Public Service Commission and the Public Utility Commission of Texas. Shareholders of both companies also must approve the deal.

But, the toughest approval the deal needs is in Maryland. Since 2005, Constellation has entered into three potential deals, the first with Florida Power and Light, which is now NextEra Energy Inc.

According to the filing, the 2005 deal crumbled “in the face of significant regulatory delays.” Resistance from the Public Service Commission and state legislators has been factored into the present merger in that it is a condition both sides can use to walk away from the deal. Additionally, anticipating a delayed process, the merger agreement allows for the closing date to be pushed to July 27, 2012, if regulatory approval is all that is needed.