Exelon, Constellation in Merger of Utilities Giants

April 28, 2011 Updated: October 1, 2015

The Exelon Byron Nuclear Generating Stations running at full capacity 12 May 2007 in Byron, Illinois, is one of 17 nuclear reactors at 10 sites in three U.S. states. Exelon Corp. said on Thursday that it reached an agreement to merge with Constellation Energy Group for around $7.9 billion in stock. (Jeff Haynes/AFP/Getty Images)
The Exelon Byron Nuclear Generating Stations running at full capacity 12 May 2007 in Byron, Illinois, is one of 17 nuclear reactors at 10 sites in three U.S. states. Exelon Corp. said on Thursday that it reached an agreement to merge with Constellation Energy Group for around $7.9 billion in stock. (Jeff Haynes/AFP/Getty Images)
NEW YORK—Exelon Corp., one of the nation’s biggest utilities, said on Thursday that it reached an agreement to merge with Constellation Energy Group for around $7.9 billion in stock.

The Chicago-based Exelon, the biggest generator of nuclear power in the United States, will pay roughly $38.60 per Constellation share. The price is a 12 percent premium over Wednesday afternoon’s closing price. The share exchange is one Constellation share for 0.93 Exelon shares.

The deal, which the companies hope to consummate in early 2012, would be named Exelon and headquartered in Chicago. “This merger creates the number one competitive energy provider with one of the industry’s cleanest and lowest-cost power generation fleets and one of the largest commercial, industrial and residential customer bases in the United States,” Exelon CEO John Rowe said in a statement Thursday.

The energy portfolio for the combined entity would consist of 55 percent of nuclear energy, 24 percent of natural gas, and 8 percent of other sources including alternative renewable energy, making it one of the cleanest power companies in the nation in terms of carbon emissions.

And the new company would have the resources to expand “new investment in the next wave of clean generation and sustainable products and services,” said current Constellation Chairman Mayo Shattuck, who will assume the role of executive chairman of the combined firm.

The deal is not without risks, especially since the new entity would be so reliant on nuclear power generation. The U.S. Congress is increasing scrutiny over new nuclear reactor construction projects following last month’s earthquake and tsunami in Japan, which triggered a crisis at the Fukushima Dai-Ichi nuclear power plant due cooling difficulties after infrastructure damages.

There has been a string of recent mergers in the utilities industry. In January, Duke Energy Corp. and Progress Energy Inc. reached a $13.7 billion merger to create the largest power company in the nation. Ohio-based DPL Inc. was bought out last week by AES Corp. for $3.5 billion.