Exelon Corporation and Constellation Energy have signed a definitive agreement to combine the two companies in a stock-for-stock transaction worth $7.9 billion. The deal will make Exelon what the company describes as the USA’s largest generator of ‘competitive’ power (probable translation – unregulated) with a total capacity of 34 GW .

Under the terms of the 28 April agreement Constellation’s shareholders will receive 0.930 shares of Exelon common stock in exchange for each share of Constellation common stock. Constellation shareholders would receive in effect $38.59 per share, or $7.9 billion in total equity value based on Exelon’s closing share price on 27 April 2011. Following completion of the merger, Exelon shareholders will own approximately 78% of the combined company and Constellation shareholders approximately 22% on a fully diluted basis. The market capitalisation of the combined company will be $34 billion.

The agreement ‘brings together Exelon’s large, environmentally advantaged generation fleet and Constellation’s industry-leading customer facing businesses’. (Translation – Exelon’s ‘green’ generation and Constellation’s marketing.) Exelon and Constellation are saying that the new company will be the country’s largest supplier by load (about 165 TWh) and by customers supplied (about 35 000 commercial and industrial and millions of households across 38 states and the Canadian provinces of Alberta and Ontario) and the largest power generator (more than 34 GW of power generation and 226 TWh of expected output), including the largest nuclear fleet (nearly 19 GW) and one of the cleanest power generation fleets (about 55% nuclear, 24% natural gas and 8% renewables/hydro) as measured by carbon diocide emissions. It will operate 22 nuclear reactors: 17 at its existing ten sites along with five at Constellation Energy’s Nine Mile Point, Calvert Cliffs and Ginna sites. Other generators in the same ballpark are Duke (35.4 GW total capacity, but 57 GW if its proposed merger with Progress Energy goes ahead), AEP (38 GW) and Nextera (43 GW, and owner of FPL, but including 7.5 GW of wind capacity).

The resulting company will retain the Exelon name and be headquartered in Chicago, although power marketing, retail and wholesale businesses will be consolidated under the Constellation brand and headquartered in Baltimore. Both companies’ renewable energy businesses will also be based in Baltimore, and the three utilities within the new Exelon (BGE, ComEd and PECO) will remain standalone organisations. Constellation chairman, president and CEO Mayo A. Shattuck III will become executive chairman of the combined company. Exelon president and COO Christopher M. Crane will become president and CEO. John Rowe will retire upon closing of the transaction.

The transaction must be approved by the stockholders of both Exelon and Constellation and the merger is also conditional on approval by the Federal Energy Regulatory Commission (FERC), Nuclear Regulatory Commission (NRC), Maryland Public Service Commission, the New York Public Service Commission, the Public Utility Commission of Texas, and other state and federal regulatory bodies. The two companies anticipate closing in early 2012.

Executives went to great lengths to keep the deal secret, the Baltimore Sun reports. Constellation and Exelon executives held their meetings in secret, and used code names (Constellation Energy was dubbed “Ginger”, while Exelon Corp. was code-named “Allspice”) to avoid attracting attention to the potential merger. They met in private clubs, had glass doors frosted to hide the identity of Wall Street financial advisers who had come to Baltimore meetings, and even took care to use plain unmarked briefcases on occasions.