Exelon 2015 Annual Report Download - page 66

Table of Contents
Exelon may not realize all the expected benefits of the Merger because of integration difficulties.
The success of the PHI acquisition will depend, in part, on Exelon’s ability to realize all or some of the anticipated benefits from integrating
PHI’s business with Exelon’s existing businesses. The integration process could be complex, costly and time-consuming. The challenges
associated with integrating the operations of PHI’s business include, among others:
• delay in implementation of our business plan for the combined business;
• unanticipated issues or costs in integrating financial, information technology, communications and other systems;
• possible inconsistencies in standards, controls, procedures and policies, and compensation structures between PHI’ s structure and our
structure; and
• difficulties in retention of key employees.
Exelon and PHI will be subject to various uncertainties while the Merger is pending that could negatively impact their ability to attract
and retain key employees, and potentially impact the company’s financial results.
Uncertainty about the effect of the Merger on employees, suppliers and customers could have a negative impact on Exelon and/or PHI.
These uncertainties could impair Exelon’s and/or PHI’s ability to attract, retain and motivate key personnel until the Merger is completed and for a
period of time thereafter, as employees and prospective employees could experience uncertainty about their future roles with the combined
company. In addition, current and prospective Exelon and PHI employees could determine that they do not desire to work for the combined
company for a variety of possible reasons. Moreover, the pendency of Merger regulatory-review proceedings has caused PHI to delay filing base
rate cases on behalf of its utilities Pepco, ACE and Delmarva which have had a material impact to their results of operations and cash flows.
The Merger could divert attention of management at Exelon and PHI, which could detract from efforts to meet business goals.
The pursuit of the Merger and the preparation for the integration could place a burden on management and internal resources. Any significant
diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process
could affect Exelon’s and/or PHI’s financial results.
Exelon is obligated to complete the Merger whether or not it has obtained the required financing.
Exelon intended to fund the cash consideration in the Merger using a combination of debt, cash from asset sales, the issuance of equity
(including mandatory convertible securities). See Note 4—Mergers, Acquisitions, and Dispositions and Note 14—Debt and Credit Agreements of
the Combined Notes to Consolidated Financial Statements for additional information regarding the merger financing. Although Exelon had sufficient
cash to fund the cash consideration in the Merger as of September 30, 2015, a $2.75 billion portion of the debt incurred to finance the cash
consideration was subject to mandatory special redemption on December 31, 2015. On December 2, 2015, the holders of $1.9 billion of that debt
exchanged those debt securities for new notes that extend the mandatory special redemption date from December 31, 2015 to June 30, 2016 (or
later under some circumstances), and on December 2, 2015, Exelon redeemed $868 million of the debt. Exelon could be required to raise
additional cash to fund the cash consideration in the Merger.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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