Exelon Turns To Profit In Q1; To Buy Pepco Holdings In Around $6.8 Bln Deal

(RTTNews) - Exelon Corp. (EXC) Wednesday reported a profit for the first quarter compared to a loss last year, reflecting higher revenues. The largest U.S. nuclear operator also said it has signed a definitive agreement to combine electric and natural gas utility company Pepco Holdings, Inc. (POM) in an all-cash transaction consideration of $27.25 per share that comes to around $6.8 billion. Pepco shares are up about 17 percent in pre-market trading.

The acquisition is anticipated to be significantly accretive to Exelon's adjusted earnings in the first full year after closing. The companies anticipate closing in the second or third quarter of 2015.

The agreement has been unanimously approved by the boards of directors of both the companies. The transaction requires approval of stockholders of Pepco Holdings.

The consideration represents a 24.7 percent premium to Pepco Holdings' closing price of $21.85 on April 25, 2014, and a 29.5 percent premium to volume-weighted average share price over the last 20 trading days ending April 25, 2014.

The agreement brings together Exelon's three top-performing electric and gas utilities - BGE, ComEd and PECO - and Pepco Holdings' electric and gas utilities - Atlantic City Electric, Delmarva Power and Pepco - to create the leading Mid-Atlantic electric and gas utility.

The combined utility businesses will serve about 10 million customers and have a rate base of around $26 billion, Exelon said.

Exelon President and CEO Christopher Crane will remain president and CEO of the combined company. The Chairman, President and CEO of Pepco Holdings, Joseph Rigby, who previously announced his planned retirement, will remain in his current roles with Pepco Holdings until the closing of the deal.

The transaction is supported by a fully committed $7.2 billion bridge facility with Barclays and Goldman Sachs.

For the first quarter, the company posted net income attributable to share holders of $90 million or $0.10 per share, compared to a loss of $4 million or $0.01 per share in the previous year.

Adjusted earnings for the recent quarter were $0.62 per share, while the company posted $0.70 per share last year.

On average, 15 analysts polled by Thomson Reuters expected the company to earn $0.69 per share for the quarter. Analysts' estimates typically exclude special items.

Operating revenues for the quarter increased to $7.24 billion from $6.08 billion a year ago. Adjusted revenue was $8.09 billion, up from $6.89 billion in the prior-year quarter. Analysts expected revenue of $6.31 billion for the quarter.

Crane said, "Exelon delivered quarterly earnings within our guidance range despite extreme weather that caused significant challenges to operations across the business."

Exelon closed Tuesday's regular trading at $36.18 on the NYSE.

Pepco Holdings ended at $22.79, down 1.34 percent. In the pre-market activity on Wednesday, the shares are up 17.38 percent at $26.75.