What to do when a high dividend stock attempts a significant acquistion of another company.
Of DOW JONES NEWSWIRES
Exelon Corp. (EXC) said Thursday it has agreed to purchase a north Texas natural-gas fired plant from Sequent Wolf Hollow LLC in a $305 million deal.
The move follows Exelon's planned $7.8 billion acquisition of Constellation Energy Group Inc. (CEG) that was unveiled last month. That deal puts Exelon--the largest operator of nuclear plants in the U.S.--in position to resuscitate some nuclear developments abandoned by Constellation because they were too costly.
When the deal between the two power companies was announced, executives said that matching Exelon's large merchant business, which sells electricity on the wholesale market, with Constellation's retail business, which markets directly to consumers, was a key driver for the deal.
Separately, Constellation on Thursday agreed to acquire MXenergy, a Connecticut supplier of natural gas and electricity, for $175 million. MXenergy has more than a half million customers in 15 states and two Canadian provinces. Constellation expects the move to supplement its growing retail business, especially in the residential market. MXenergy shareholders Denham Capital Management, Charterhouse Group LLC and Sempra Energy Trading LLC support the deal.
Exelon said the acquisition of the Texas plant will expand its clean-energy portfolio in anticipation of coming clean-air regulations. "This is not a needle mover," William Von Hoene, executive vice president of finance and legal at Exelon, said during the Deutsche Bank Securities alternative energy, utilities and power conference Thursday afternoon.
The Wolf Hollow acquisition is expected to close in the third quarter upon regulatory approval.
It also expands the company's presence in Texas, where Exelon already owns and operates three gas-fired plants and where Constellation also has generation assets. Hoene said Wolf Hollow "will be modestly accretive to cash flows in 2012 and neutral to earnings near-term."
Exelon last month reported first-quarter earnings fell 11% amid hedging losses and other charges, though revenue was up due to higher prices and unusually cold weather in Texas.
Shares of Exelon closed 1.1% higher at $42, while Constellation also advanced 1.1% to $37.07.
-By Naureen S. Malik and Tess Stynes, Dow Jones Newswires; 212-416-4210; naureen.malik@dowjones.com
