Regulators Approve Pepco, Exelon Merger

Pepco Holdings Inc. (NYSE: POM) saw its shares take a massive upward swing late Wednesday following approval of the Exelon Corp. (NYSE: EXC) merger. Regulators in Washington have just announced that Exelon’s proposed $6.8 billion acquisition of Pepco was approved. Essentially this has allowed for the formation of the biggest utility in the U.S.

Previously, in August the D.C. Public Service Commission, which is the regulating body for utility and telecom companies, said that this deal would not be approved. However in this most recent vote the commission voted to approve the merger in a count of 2 to 1.

Even in February, regulators would not approve this merger unless allocation of a $78 million investment was altered such that residential rates would not be held down.

According to Reuters, Pepco serves roughly 2 million customers in the Washington D.C. area, Delaware, Maryland and New Jersey. Exelon has about 7.8 million customers in Maryland, Illinois and Pennsylvania.
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So far in 2016 (excluding Wednesday’s move), Pepco has greatly underperformed the broad markets, with the stock down 18%. The performance over the past year is practically identical.

Shares of Pepco were trading up 27% at $27.01 on Wednesday, with a consensus analyst price target of $24.63 and a 52-week trading range of $21.12 to $27.34.

Exelon shares were down 1.2% at $34.59, with a consensus price target of $34.25 and a 52-week range of $25.09 to $35.50.