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FPL - Constellation Energy Merger

The agreement between the two will create the nation's largest competitive energy supplier

On Monday, Dec 19, FPL and Constellation Energy Group announced their agreement to merge, creating the largest national energy supplier, in a $11 billion deal. The new FPL / COnstellation entity will have market capitalization of about $28 billion, revenue of $27 billion and total assets of $57 billion.

FPL Group, Inc. and Constellation Energy are two of the strongest, fastest-growing and most successful energy companies in America. The agreement between the two will create the nation's largest competitive energy supplier and its second-largest electric utility portfolio.

One FPL share will turn into one Constellation Energy share, while each Constellation Energy share will convert to 1.444 shares of FPL.

Constellation Energy shareholders will get a 15 percent premium, owning about 40 percent of the new FPL-Constellation merger.

FPL Group, with headquarters in Juno Beach, Fla, earns most of its revenue out of Florida Power & Light. Baltimore hosts Constellation's quarters, which runs Baltimore Gas and Electric, although most revenue comes from no regulated operations.

The combined company will maintain dual headquarters in Juno Beach, Fla., and Baltimore. It will have approximately 21,750 employees and will serve more than 5.5 million electric customers in Florida and Maryland and 625,000 gas customers in Maryland.

Its competitive wholesale and retail businesses will serve 72 of the FORTUNE 100 companies. Its generation portfolio will be the nation's largest, exceeding 45,000 megawatts of capacity.

It will be the third-largest nuclear plant operator in the United States, owning and operating seven nuclear power stations with eleven units, including FPL Group's pending acquisition of the Duane Arnold nuclear station.

FPL Group's CEO, Lewis Hay III, will get the seat of CEO in the new merged company. Mayo A. Shattuck, CEO of Constellation Energy, will be the chairman of the board of Constellation Energy, the name to be had by the FPL / Constellation merged entity:

"This deal is all about creating the premiere competitive energy business, operating wherever competitive markets are functional." (Lewis Hay)

The combination of the two generation fleets will result in a more balanced fuel mix and a broader geographic territory, thus improving load-serving capabilities.

FPL Group's fuel mix, which is primarily oil and natural gas (73 percent), nuclear (13 percent) and wind (10 percent), complements Constellation Energy's fuel mix, which is primarily oil and natural gas (41 percent), nuclear (32 percent) and coal (23 percent).

Combining their respective fleets is expected to reduce fuel risk exposure and increase purchasing power. FPL Group currently is one of the largest consumers of natural gas in the United States, a position that can be leveraged by the combined company as it builds upon Constellation Energy's efforts to expand in the natural gas sector.

Merrill Lynch is serving as financial advisor to FPL Group, and Morgan Stanley is serving as financial advisor to Constellation Energy. Cravath, Swaine & Moore LLP is serving as transaction counsel to FPL Group, and Kirkland & Ellis LLP is serving as transaction and regulatory counsel to Constellation Energy.

Skadden, Arps, Slate, Meagher & Flom LLP is serving as regulatory counsel to FPL Group. Lehman Brothers has provided a fairness opinion to FPL Group's board of directors and Goldman Sachs has provided a fairness opinion to Constellation Energy's board of directors.