Exelon 2014 Annual Report Download - page 174

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
earliest. Exelon has also been named in a federal court case with similar claims and is in the process of negotiating a settlement.
Exelon does not believe these suits will impact the completion of the transaction, and they are not expected to have a material
impact on Exelon’s results of operations.
Through December 31, 2014, Exelon has incurred approximately $179 million of expense associated with the proposed merger,
primarily $48 million related to acquisition and integration costs and $131 million of costs incurred to finance the transaction. The
Merger Agreement also provides for termination rights on behalf of both parties. Under certain circumstances, if the Merger
Agreement is terminated, PHI may be required to pay Exelon a termination fee ranging from $259 million to $293 million plus certain
expenses. If the Merger Agreement does not close due to a regulatory failure, Exelon may be required to pay PHI a termination fee
equal to the amount of purchased nonvoting preferred securities of PHI described above, through the redemption by PHI of the
outstanding nonvoting preferred securities for no consideration other than the nominal par value of the stock.
Merger Financing
Exelon intends to fund the all-cash transaction using a combination of approximately $3.5 billion of debt, up to $1.0 billion in cash
from asset sales primarily at Generation, and the remainder through issuance of equity (including mandatory convertible securities).
On June 11, 2014, Exelon marketed an equity offering of 57.5 million shares of its common stock at a public offering price of $35 per
share in connection with forward sales agreements and $1.2 billion of junior subordinated notes in the form of 23 million equity
units. In addition, Exelon signed a 364-day $7.2 billion senior unsecured bridge credit facility to support the contemplated transaction
and provide flexibility for timing of permanent financing, which has subsequently been reduced to a $3.2 billion facility as a result of
the execution of the debt and equity security issuances and the net after-tax cash proceeds from generating asset divestitures during
the second half of 2014. See Note 13—Debt and Credit Agreements and Note 19—Common Stock for more information.
Acquisitions
Acquisition of Integrys Energy Services, Inc.
On November 1, 2014, Generation acquired the competitive retail electric and natural gas business activities of Integrys Energy
Group, Inc. through the purchase of all of the stock of its wholly owned subsidiary, Integrys Energy Services, Inc. (Integrys) for a
purchase price of $332 million, including net working capital. Generation has elected to account for the transaction as an asset
acquisition for federal income tax purposes. As of December 31, 2014, Generation had remitted $319 million to Integrys Energy
Group, Inc. and the remaining balance of $13 million, which is included in Other current liabilities on Exelon’s Consolidated Balance
Sheets, will be paid during the first or second quarter of 2015. The generation and solar asset businesses of Integrys are excluded
from the transaction. The Purchase Agreement also includes various representations, warranties, covenants, indemnification and
other provisions customary for a transaction of this nature.
Consistent with the applicable accounting guidance, the fair value of the assets acquired and liabilities assumed was determined as
of the acquisition date through the use of significant estimates and assumptions that are judgmental in nature. Some of the more
significant estimates and assumptions used include: projected future cash flows (including the amount and timing); discount rates
reflecting the risk inherent in the future cash flows; and future power and fuel market prices.
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