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Exelon's Constellation Business Acquiring Integrys Energy Services

 

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Exelon Corporation (NYSE: EXC) and Integrys Energy Group, Inc. (NYSE: TEG) announced they have entered into a definitive agreement for Exelon to purchase Integrys Energy Services Inc., a competitive retail electricity and natural gas subsidiary serving approximately 1.2 million commercial, industrial, public sector and residential customers across 22 Midwest, mid-Atlantic and Northeastern states and the District of Columbia. Integrys Energy Services will become part of Exelon’s Constellation business unit, strengthening Constellation’s retail power and gas business, serving approximately 2.5 million residential and business customers across the continental United States.

Exelon will pay $60 million for the Integrys retail operations, plus adjusted net working capital at the time of closing. Integrys Energy Services had adjusted working capital of about $183 million as of May 31, 2014. The transaction does not include Integrys’ energy assets — primarily solar — which will remain a part of Integrys Energy Group, Inc. “Integrys Energy Services’ geographic footprint is a perfect strategic fit for Constellation and will create opportunities to reach more customers and grow the business, particularly in regions where Exelon also owns significant generation assets,” said Chris Crane, Exelon president and CEO. “Constellation and Integrys share strong track records of delivering value to customers, and we see opportunities to build on that tradition as a combined company.”

Charles A. Schrock, Integrys Energy Group chairman and CEO, said, “As part of our assessment of Integrys’ portfolio of businesses earlier this year, we determined it was appropriate to divest our retail energy marketing businesses. With an established presence in the northeastern United States, we are confident these retail electric and natural gas marketing businesses will continue to do well as part of a larger organization, such as Constellation.”

Integrys said that it was in the late stages of a competitive process to divest its electric and natural gas retail marketing businesses as part of a June 23, 2014, news release announcing a definitive agreement between Wisconsin Energy Corp. and Integrys, where Wisconsin Energy would acquire Integrys Energy Group in a stock and cash transaction valued at $9.1 billion.

Mark Huston, president of Constellation Retail, said the transaction will give Integrys Energy Services customers access to a growing company and a broader array of energy products and services.

“This combination adds scale to our power and natural gas portfolio, creating a stronger, more diverse business that will continue to deliver what our customers want: a trusted partner that offers a full spectrum of energy products and services at competitive prices,” Huston said.

Established in 1994, Integrys Energy Services, Inc. provides competitive supply solutions, structured products and strategies that allow retail residential, commercial and industrial customers throughout the northeast quadrant of the United States to manage their energy needs. At December 31, 2013, Integrys Energy Services, with approximately 280 employees, had $2 billion in annual sales.

Integrys Energy Services will operate under the Constellation brand after the transaction closes. Residential and commercial customers of Integrys will experience no disruption to service as a result of the transaction and all existing customer contracts will be honored, Huston said. This includes Integrys’ municipal electricity aggregation contract with the City of Chicago. The contract is currently scheduled to expire in May 2015.

Baltimore-based Constellation is a leading competitive retail supplier of electricity, natural gas and energy products and services for homes and businesses across the continental U.S. Its family of retail businesses serves more than 100,000 business and public-sector customers, including more than two-thirds of the Fortune 100, and approximately 1 million residential customers.

The transaction is conditioned on approval by the Federal Energy Regulatory Commission and is subject to the notification and reporting requirements under the Hart-Scott-Rodino Act. The companies expect to close in fourth quarter 2014 or first quarter 2015.

Lazard is acting as sole financial advisor to Integrys Energy Group, and Bracewell & Giuliani LLP is providing legal counsel. Cadwalader, Wickersham & Taft LLP served as legal advisors to Exelon.

 

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