Duke Energy and Progress Energy says that both companies' boards of directors have unanimously approved a definitive merger agreement to combine the two companies in a stock-for-stock transaction.

The combined company, to be called Duke Energy, will be the country's largest utility, with: • Approximately $65 billion in enterprise value and $37 billion in market capitalization • The country's largest regulated customer base, providing service to approximately 7.1 million electric customers in six regulated service territories North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio • Approximately 57 gigawatts of domestic generating capacity from a diversified mix of coal, nuclear, natural gas, oil and renewable resources • The largest regulated nuclear fleet in the country.

'Our industry is entering a building phase where we must invest in an array of new technologies to reduce our environmental footprints and become more efficient,' said Jim Rogers, chairman, president and chief executive officer of Duke Energy. 'By merging our companies, we can do that more economically for our customers, improve shareholder value and continue to grow.

'Combining Duke Energy and Progress Energy creates a utility with greater financial strength and enhanced ability to meet our challenges head-on,' Rogers continued.

'This combination of two outstanding companies is a natural fit,' said Bill Johnson, chairman, president and chief executive officer of Progress Energy. 'It makes clear strategic sense and creates exceptional value for our shareholders. Together, we can leverage our best practices to achieve even higher levels of safety, operational excellence and customer satisfaction, and save money for customers by combining our fuel purchasing power and the dispatch of our generating plants.

'This merger also provides predictable earnings and cash flows to support our dividend payments to shareholders,' Johnson added.

Terms 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 represents a 7.1 percent premium to the unaffected 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 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.

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.

The combination is anticipated to be accretive to Duke Energy's adjusted earnings in the first year after closing.

Based on Duke Energy's current quarterly cash dividend of 24.5 cents per common share, Progress Energy shareholders would receive an approximate 3 percent dividend increase.

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.

Structure, Organization & Leadership When the merger is completed, Rogers will become executive chairman of the new organization. In this role, 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.

Johnson will become president and chief executive officer of the new company.

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.

The combined company will be headquartered in Charlotte and will maintain substantial operations in Raleigh.

Until the merger has received all necessary approvals and has closed, the companies will continue to operate as separate entities.

Customers will see no change in their current electric utility companies including: Progress Energy Carolinas and Progress Energy Florida and Duke Energy Carolinas, Duke Energy Indiana, Duke Energy Ohio, Duke Energy Kentucky, Commercial Power, Duke Energy Generation Services and Duke Energy International.

Approvals & Timing 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.

The companies are targeting a closing by the end of 2011

Tags: Duke Energy