2 Utilities to Merge in $3.1-Billion Deal : Energy: Baltimore Gas & Electric and Potomac Electric Power combined would create industry’s ninth-largest company. A 10% staff cut is planned.

Baltimore Gas & Electric Co. and Potomac Electric Power Co. said Monday that they will merge in a $3.1-billion stock deal, creating the nation’s ninth-largest utility company in the biggest industry merger to date.

The companies said they plan to slash about 10% of their combined work forces, or more than 1,250 jobs, as they eliminate duplication. Overall, they expect cost savings of about $1.3 billion over 10 years.

The combined company would have $15 billion in assets and $5 billion in annual revenue, and would serve 1.8 million electricity customers and more than 530,000 gas customers in Maryland and Washington. Baltimore Gas has 7,951 employees, while Pepco has 4,561.

Pepco Chairman Edward Mitchell said in a news conference that the merger would be the largest in the current wave of consolidation, which is being driven by industry deregulation.

“This is the biggest of all to date,” said Mitchell, who would also serve as chairman of the new company.

Under the agreement, Baltimore holders would get one share in the merged company for each Baltimore share and Potomac holders would get 0.997 share for each Potomac share held in a tax-free pooling of interests.

The exchange ratio approximates a 20% premium to the average Pepco trading price over the previous week’s level. Baltimore Gas has 148 million common shares outstanding and Pepco has 118 million.

The $3.1-billion value of the merger is based on Pepco’s stock price at $26, according to Goldman, Sachs & Co.

Pepco shares rose $1.75 to $23.25 on Monday, while Baltimore Gas fell $1 to $25.125 on the New York Stock Exchange.

The new company, which will be named soon, would be combined into a single utility. The non-utility operations of Baltimore Gas and Pepco would be combined as subsidiaries of the new company.

The new company’s board of directors will consist of 16 members, with nine appointed from Baltimore Gas’ current board and seven from Pepco’s current board.The merger is subject to approval by shareholders of both companies and regulators, which is expected by early 1997.