Constellation Energy Group Inc. has agreed to sell itself to Exelon Corp. in a $7.9-billion stock deal that would create the largest energy provider in the United States.
The deal announced Thursday comes less than three years after Constellation narrowly averted bankruptcy and represents the Baltimore company’s third attempt to sell itself since 2006.
Chicago-based Exelon will have controlling interest in the combined company, if the deal is approved by shareholders and regulators. The new company would have a market capitalization of $34 billion and be based in Chicago, retaining the Exelon name.
Constellation Chairman and Chief Executive Mayo A. Shattuck III, who transformed the company from a small utility into the largest energy marketer in the U.S., will be executive chairman. Exelon CEO John Rowe will retire at the deal’s closing. Christopher Crane, Exelon’s president and chief operating officer, will become president and chief executive of the combined company.
Constellation shareholders will receive 0.930 shares of Exelon common stock for each Constellation share. Based on Exelon’s closing share price Wednesday, Constellation stockholders would receive shares valued at $38.59, an 18% premium.
The union with Exelon would be the third large-scale transaction that Constellation has pursued since 2006 under Shattuck.
After evolving from a traditional utility to a major player in the energy industry, Constellation reached a low point in late 2008 amid the financial-sector meltdown. Facing a credit crisis, Constellation agreed to a shotgun deal to sell itself to Warren Buffett’s MidAmerican Energy Holdings Co. for $4.7 billion.
But in an about-face, Constellation terminated that agreement to remain an independent company by selling nearly half its nuclear power business to its then-largest shareholder, French utility EDF Group, for nearly the same price as the earlier deal with Buffett.
In 2006, a merger with Florida Power & Light fell through amid political and regulatory pressure and growing rancor over increasing rates.
In the last two years, Constellation has shored up its finances, shed shaky businesses and reduced its debt. In 2009, the company reported a $4.4-billion profit. Constellation had a $982.6-million net loss last year largely attributed to costs related to its nuclear power business.
Exelon would gain Constellation’s growing gas and electric supply business, which sells power to wholesale, commercial and industrial customers across the country. Constellation has said its NewEnergy unit could account for up to 45% of the company’s earnings this year.
In addition, Exelon would gain a stake in Constellation’s nuclear plants in Maryland and New York through a merger. EDF Group owns nearly half of Constellation’s nuclear power business.
EDF, now Constellation’s second-largest shareholder, said in a statement Thursday that it was studying the proposed terms of the deal.