Duke Energyand Progress Energy Inc. plan to merge in a stock-for-stock transaction worth $13.7 billion to Progress shareholders. Duke also agreed to assume $12.2 billion in Progress Energy debt.

The transaction price represents a 7.1 percent premium to the closing stock price of Progress Energy on Jan. 5, 2011 and a 3.9 percent premium to the closing stock price of Progress Energy on Jan. 7, 2011. The companies are targeting a closing by the end of 2011.

The combined company, to be called Duke Energy, will be among the country’s largest utilities with $65 billion in enterprise value and $37 billion in market capitalization;  7.1 million electric customers in six regulated service territories North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio; 57 GW of domestic generating capacity from a  mix of coal, nuclear, natural gas, oil and renewable resources; and one of the largest regulated nuclear fleets in the country.

Under the merger agreement, Progress Energy’s shareholders will receive 2.6125 shares of common stock of Duke Energy in exchange for each share of Progress Energy common stock. Based on Duke Energy’s closing share price on Jan. 7, 2011, Progress Energy shareholders would receive a value of $46.48 per share, or $13.7 billion in total equity value.

Duke Energy also will assume approximately $12.2 billion in Progress Energy net debt. The transaction price also represents a 6.6 percent premium to the average closing stock price of Progress Energy over the last 20 trading days ending Jan. 5, 2011, and a 6.4 percent premium over the last 20 trading days ending Jan. 7, 2011.
When the merger is completed, Jim Rogers will become executive chairman of the new organization. Rogers will advise the CEO on strategic matters, play an active role in government relations and serve as the company’s lead spokesperson on energy policy. Bill Johnson will become the new company’s president and chief executive officer.

Both Rogers and Johnson will serve on the board of directors of the combined company, which will be composed of 18 members, with 11 designated by Duke Energy’s board of directors and seven designated by Progress Energy’s board of directors.

Following completion of the merger, officials anticipate Duke Energy shareholders will own approximately 63 percent of the combined company and Progress Energy shareholders will own approximately 37 percent on a fully diluted basis.

Duke Energy expects to effect a reverse stock split immediately prior to closing, and, as a result, the exchange ratio will be appropriately adjusted at that time to reflect the reverse split.

The combined company will be headquartered in Charlotte and will maintain substantial operations in Raleigh.
Completion of the merger is conditioned upon, among other things, the approval of the shareholders of both companies, as well as expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Other necessary regulatory filings include: Federal Energy Regulatory Commission (FERC), Nuclear Regulatory Commission (NRC), North Carolina Utilities Commission (NCUC) and South Carolina Public Service Commission (SCPSC).

The companies also will provide information regarding the merger to their other state regulators: the Florida Public Service Commission, Indiana Utility Regulatory Commission, Kentucky Public Service Commission and Ohio Public Utilities Commission.

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