SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 1999
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
- ----------- ---------------------------------- ------------------
1-11375 UNICOM CORPORATION 36-3961038
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box A-3005
Chicago, Illinois 60690-3005
312/394-7399
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box 767
Chicago, Illinois 60690-0767
312/394-4321
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Item 5. Other Events
On September 23, 1999, Unicom Corporation ("Unicom") and
PECO Energy Company, a Pennsylvania Corporation ("PECO"), issued
a joint press release announcing that they, along with a wholly-
owned subsidiary of PECO, had entered into an Agreement and Plan
of Exchange and Merger, dated as of September 22, 1999 (the
"Merger Agreement").
In connection with approving the Merger Agreement and the
transactions contemplated thereby, the Unicom Board of Directors
approved an amendment to Unicom's Rights Agreement, to render it
inapplicable to the transactions contemplated by the Merger
Agreement. In addition, the Rights Agreement will now expire on
the earlier of (i) February 2, 2008, (ii) the time at which the
Rights are redeemed pursuant to the Rights Agreement, (iii) the
time at which the Rights are exchanged pursuant to the Rights
Agreement or (iv) the time that is immediately prior to the
effective time of the merger contemplated by the Merger
Agreement.
The Merger Agreement and the Amendment to the Rights
Agreement will be filed by Unicom with the SEC within the next
few days. A press release announcing the transaction is filed
herewith as Exhibit 99 and is incorporated herein by reference.
The description of the Merger Agreement and the Amendment to
Rights Agreement set forth above and in the press release does
not purport to be complete and is qualified in its entirety by
reference to the provisions of such agreements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrants have duly caused this report to be
signed on their behalf by the undersigned thereunto duly
authorized.
UNICOM CORPORATION
(Registrant)
Date: September 23, 1999 By: John C. Bukovski
------------------------
John C. Bukovski
Senior Vice President
COMMONWEALTH EDISON COMPANY
(Registrant)
Date: September 23, 1999 By: John C. Bukovski
-------------------------
John C. Bukovski
Senior Vice President
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Exhibit Index
Exhibit
Number Description of Exhibit
1. None
2. None
4. None
16. None
17. None
20. None
23. None
24. None
27. None
99. Press release dated September 23, 1999
<PAGE>
UNICOM AND PECO ENERGY AGREE TO MERGER OF EQUALS
COMBINATION VALUED AT $31.8 BILLION
Chicago, IL and Philadelphia, PA (September 23, 1999)
Unicom Corporation (NYSE: UCM) and PECO Energy Company (NYSE: PE)
today announced that they have entered into a definitive
agreement providing for a merger of equals. The merger, which has
been unanimously approved by both companies' boards of directors,
will create a new holding company with a total value of
approximately $31.8 billion ($15.2 billion in equity market
value; $16.6 billion in debt and preferred stock). Shareholders
of both companies will be offered the option of receiving cash or
stock in the new holding company. The transaction will be
accounted for as a purchase and is anticipated to be accretive to
both companies' earnings per share in the first year after
closing, excluding one-time merger-related charges.
The new holding company will be the nation's largest
electric utility based on its approximately 5 million customers
and it will have total revenues of $12.4 billion. The combined
company will be the nation's fourth largest power generator, with
a generation portfolio of more than 22,500 megawatts, and will be
a leader in the growing U.S. wholesale power marketing business.
Based on current equity market values, the new company would rank
third in the industry with a market capitalization of $15.2
billion.
Each shareholder of PECO Energy will have the opportunity to
elect to receive for each PECO Energy share either one new
holding company common share or $45.00 in cash, subject to
proration; and each shareholder of Unicom will have the
opportunity to elect to receive for each Unicom share either 0.95
new holding company common shares or $42.75 in cash, subject to
proration. The cash prices represent a premium of approximately
11% to PECO Energy's and Unicom's ten-day average trading prices
through September 22, 1999.
Based on approximately 182.4 million shares of PECO Energy
expected to be outstanding immediately prior to the close of the
transaction (after planned stock repurchases), PECO Energy
shareholders will receive approximately 165.7 million shares in
the new holding company and $750.0 million in cash. Based on
approximately 191.3 million shares of Unicom expected to be
outstanding immediately prior to the close of the transaction
(after planned stock repurchases), Unicom shareholders will
receive approximately 165.1 million shares in the new holding
company and $750.0 million in cash. At the close of the
transaction, PECO Energy and Unicom shareholders will each own
approximately 50% of the new holding company.
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The transaction is expected to be tax-free to shareholders
to the extent they receive common stock of the combined company
and, in general, cash received is expected to be taxed as capital
gains.
Corbin A. McNeill, Jr., PECO Energy's chairman, president
and chief executive officer, said, "We are pleased to announce
this strategic combination between PECO and Unicom. This merger
catapults the combined company into the top tier of national
energy companies. We believe in the competitive and strategic
value of size and scope which will increase our future earnings
growth rates, creating value for shareholders. We will have a
strategic portfolio of low-cost generation assets and significant
transmission and distribution operations covering two of the top
five metropolitan areas. Our combined talent and technical
expertise positions us to provide a broad range of services to
our customers. This merger provides the best opportunity for our
two regional companies to become a national leader in the energy
industry. Together, we can accomplish much more than either
company could on a stand-alone basis."
John W. Rowe, Unicom's chairman, president and chief
executive officer, said, "The merger creates world-class
generation and power marketing businesses. It creates a base from
which we will build a leading energy delivery business and
establish ourselves as a significant competitor in the emerging
retail energy marketplace. Unicom and PECO are two companies with
complementary strategies. Because the merger provides scale,
scope and resources, it allows the combined company to continue
to grow and maximize the benefits of both strategies -- all in
an accretive transaction."
Mr. McNeill said, "Our generation capacity gives us the
ability to provide economically produced power. Furthermore, our
power marketing capability allows us to optimize the value of
that capacity in the marketplace. Both PECO and Unicom are
experienced operators of nuclear power plants. We intend to be
the premier nuclear operator in the nation. We also intend to add
more clean, low-cost generation to our energy portfolio."
Mr. Rowe said, "The combined company will continue to
strengthen its transmission and distribution systems and, over
time, we expect to expand our footprint in this essential segment
of our business. My immediate priority is, and must be, bringing
Commonwealth Edison's distribution service to levels that meet
those achieved by other metropolitan utilities. We will have made
substantial progress in that effort by the time this merger is
consummated. Thereafter, we are committed to making sure that
both our operating utilities, ComEd and PECO, provide service
that satisfies the ever-increasing expectations of our customers.
"We also intend to use the resources of this combination to
offer related products and services such as distributed
generation, infrastructure and energy services, and
telecommunications to a broad base of customers both inside and
outside our service territories," said Mr. Rowe.
<PAGE>
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Mr. McNeill said, "Under John's leadership, Unicom has
rapidly become one of the most efficient power generators in the
nuclear power industry while it has significantly improved plant
safety performance. All of us at PECO are eager to work with the
Unicom team. The combined skills and experience of PECO and
Unicom will give the merged company what it takes to thrive as
our industry continues to evolve in the next millenium. We will
combine the best practices and talent from each company to create
the preeminent energy company for both generation and
distribution. In addition, both companies have a tradition of
active corporate citizenship and strong economic development
initiatives. John and I are both committed to continuing this
level of support in the new company."
Mr. Rowe said, "Combining our large and improving nuclear
operations with PECO's focused generation and power marketing
strategy creates one of the leading value-creation engines in the
industry. Corbin and his team have an aggressive plan and a
commitment to operational excellence that has made PECO a leader
in generation. I am confident that with the talent of our
combined teams we will be able to satisfy our customers and
create value for shareholders."
The dividend on the new company's stock is anticipated to be
$1.69 per share, which is equivalent to Unicom's current annual
dividend, adjusted for the exchange ratio. Currently, Unicom pays
an annual dividend of $1.60 per share and PECO Energy pays an
annual dividend of $1.00 per share.
The companies expect to achieve annual cost savings of
approximately $100 million in the first year after the close of
the merger, which grow to over $180 million by the third year.
Sixty percent of these savings will come from regulated
operations and forty percent will come from unregulated
operations. These cost savings are expected to result primarily
from eliminating duplicate corporate and administrative positions
and programs and achieving efficiencies in operations, business
processes and purchasing. Based on these cost savings alone, the
transaction is expected to be accretive in the first year after
closing. In addition, as a result of the combination, the
companies expect to achieve substantial revenue enhancements.
The companies will seek to minimize the impact of the merger
on the workforce through a combination of attrition and
separation packages. Reductions due to the merger are expected to
be approximately 5% of the consolidated workforce of 22,500. All
union contracts will be honored.
<PAGE>
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Following the close of the merger, Corbin A. McNeill, Jr.
and John W. Rowe will become co-chief executive officers of the
new holding company for a transition period lasting until
December 31, 2003. During the first half of the transition
period, Mr. McNeill will be chairman and Mr. Rowe will be
president of the new holding company. Mr. McNeill will serve as
chairman of the board of directors for the first half of the
transition period and Mr. Rowe will serve as chairman of the
executive committee of the board. During the second half of the
transition period, Mr. Rowe will serve as chairman of the board
of directors and Mr. McNeill will serve as chairman of the
executive committee of the board. At the end of the transition
period, Mr. Rowe will become chairman and sole chief executive
officer of the new holding company. Mr. McNeill will remain on
the board of directors.
Mr. McNeill will have the responsibility for overseeing the
generation and power marketing operations of the new company and
Mr. Rowe will have the responsibility for overseeing transmission
and distribution operations, as well as unregulated retail
enterprises.
The board of directors of the new holding company will
consist of 16 directors; including Messrs. McNeill and Rowe, PECO
Energy and Unicom each will designate eight directors.
The new holding company, to be named at a later date, will
be headquartered in Chicago, and the generation and power
marketing operations will have its headquarters in the
Philadelphia region. Unicom's and PECO Energy's electric and gas
utility operations will remain separate subsidiaries of the
holding company and will continue to operate under the names
Commonwealth Edison Company and PECO Energy Company and will
maintain their headquarters in Chicago and Philadelphia. The
companies will retain and build upon their existing brand
identities and customer loyalties in their service territories.
The new holding company will be incorporated in Pennsylvania.
The merger is conditioned, among other things, upon the
approvals of the shareholders of both companies and the
completion of regulatory procedures before the Pennsylvania
Public Utility Commission, the Illinois Commerce Commission, the
Nuclear Regulatory Commission, the Securities and Exchange
Commission (SEC) and the Federal Energy Regulatory Commission.
The companies intend to register the new company as a holding
company with the SEC under the Public Utility Holding Company
Act. The companies anticipate that the regulatory processes can
be completed in approximately 12 months.
Wasserstein Perella & Co. and Goldman, Sachs & Co. acted as
financial advisors, and Jones, Day, Reavis & Pogue acted as legal
counsel to Unicom Corporation. Salomon Smith Barney and Morgan
Stanley Dean Witter acted as financial advisors, and Cravath,
Swaine & Moore acted as legal counsel to PECO Energy Company.
<PAGE>
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Based in Chicago, Unicom Corporation is the parent of
Commonwealth Edison Company, which provides electric service
across northern Illinois, serving approximately 3.4 million
customers or 70 percent of the state's population. ComEd has the
largest nuclear fleet in the country, with a total capacity of
9,400 megawatts from 10 generating units at five sites. In March
1999, Unicom announced the sale of its fossil operations, with a
total capacity of 9,772 megawatts. The sale is expected to close
this November. With more than $7 billion in revenues in 1998 and
nearly 16,000 employees, Unicom is also the parent of Unicom
Enterprises, Inc., the holding company for its unregulated
subsidiaries.
PECO Energy Company is an electric and gas utility with
6,500 employees serving 1.5 million electric customers in the
five-county Philadelphia region and more than 400,000 natural gas
customers. It has aggressively forged into the deregulated
marketplace, trading wholesale power 24 hours a day in 47 states
and Canada, purchasing and operating nuclear generation and
establishing unregulated ventures in retail energy sales,
telecommunications and utility infrastructure management.
PECO Energy has set new nuclear performance standards in safety,
capacity factors, refueling efficiency and low operating and
maintenance costs, while producing more than 33 billion kilowatt-
hours of nuclear electricity in 1998. PECO Energy also owns and
operates coal, natural gas, oil, landfill gas and hydro
generating plants.
This press release contains certain forward-looking statements
within the meaning of the safe-harbor provisions of the
Securities Exchange Act of 1934; these forward-looking statements
are subject to various risks and uncertainties. The factors that
could cause actual results to differ materially from the
projections, forecasts, estimates and expectations discussed
herein may include factors that are beyond the companies' ability
to control or estimate precisely, such as estimates of future
market conditions, the behavior of other market participants and
the actions of the Federal and State regulators. Other factors
include, but are not limited to, actions in the financial
markets, weather conditions, economic conditions in the two
companies' service territories, fluctuations in energy-related
commodity prices, conversion activity, other marketing efforts
and other uncertainties. Other risk factors are detailed from
time to time in the two companies' SEC reports. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press
release. The companies do not undertake any obligation to
publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of
this press release.
Contacts for Unicom: Contacts for PECO Energy:
Media: Media:
Adrienne Levatino Neil McDermott
(312) 394-3003 (215) 841-5555
Investors: Investors:
Eunice Collins Susan Coan
(312) 394-8354 (215) 841-5747
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