Exelon to Proceed With Rejected $6.8 Billion Pepco Deal

Updated on
  • District of Columbia overlooked `substantial benefits'
  • Companies were given 30 days to ask for reconsideration

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. D.C. regulators expressed concern that the merger would create a company less focused on local customers. The application might be re-filed 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.

Pepco fell 0.1 percent to $22.98 at the close in New York. It has dropped 16 percent since the rejection. Exelon fell 2 percent to $30.76.

Myra Oppel, a Pepco spokeswoman, and Paul Elsberg, an Exelon spokesman, had no further comment on how the companies will proceed.

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 his company’s 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 by the state’s attorney general to block approval of the deal by Maryland regulators. Regulators in Delaware, New Jersey, and Virginia have signed off on the transaction.