Exelon to proceed with $6.8B Pepco deal after rejection

By: Bloomberg August 31, 2015

Exelon Corp. and Pepco Holdings Inc. said they’ll proceed with their $6.8 billion merger to create the largest U.S. utility by customer count after the District of Columbia Public Service Commission rejected it on Aug. 25.

“The decision fails to recognize the substantial immediate and long-term benefits of our merger proposal to citizens, businesses and communities in the District of Columbia,” Exelon, based in Chicago, and Pepco, based in Washington, said in a statement released Monday. “Our merger proposal is in the public interest, and we will continue working to complete the merger, which all other jurisdictions have approved.”

The commission gave Exelon and Pepco 30 days to request reconsideration. The companies might re-file their application in the district offering new terms, Julien DuMoulin-Smith, a New York-based analyst for UBS AG, wrote in an Aug. 26 note to clients.

The announcement was made before regular trading began on U.S. markets. Pepco rose 2.1 percent to $23.50 at 8:56 a.m. in New York. It had dropped 15 percent since the rejection.

Paul Elsberg, an Exelon spokesman, didn’t immediately return a phone call seeking comment on the company’s strategy.

The commission voted against the transaction as filed on Aug. 25. The companies said they reached their decision to proceed based on a final order filed Aug. 27.

Wholesale markets

Exelon Chief Executive Officer Chris Crane wants to add Pepco’s predictable utility revenue, reducing reliance on power sold into competitive wholesale markets by Exelon’s nuclear fleet, the nation’s largest. With Pepco, Exelon would be the largest U.S. utility owner by customer count.

Exelon offered $27.25 a share in cash for Pepco in April 2014. The combined utilities would serve about 10 million customers in cities including Washington, Chicago, Baltimore and Philadelphia.

Earlier this month, Exelon was allowed to push ahead with its merger when a Maryland judge rejected a bid byAttorney General Brian E. Frosh to block approval of the deal by Maryland regulators. Regulators in Delaware, New Jersey, and Virginia have signed off on the transaction.