UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
BALTIMORE GAS AND ELECTRIC COMPANY
a Maryland corporation
(Name of Issuer)
Common Stock, No Par Value Per Share
(Title of Class of Securities)
059165 10 0
(CUSIP Number)
Ellen Sheriff Rogers
Associate General Counsel, Assistant Secretary
and Assistant Treasurer
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
(202) 872-3526
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 22, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the
statement [X].
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SCHEDULE 13D
CUSIP No. 059165 10 0
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Potomac Electric Power Company
53-0127880
2. Check the Appropriate Box if a Member of a Group
(a) [ ] (b) [ ]
3. SEC Use Only
4. Source of Funds
WC/OO
5. Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6. Citizenship or Place of Organization
District of Columbia and Virginia
7. Sole Voting Power
29,357,896*
8. Shared Voting Power
0
9. Sole Dispositive Power
29,357,896*
10. Shared Dispositive Power
0
11. Aggregate Amount Beneficially Owned by Each Reporting
Person
29,357,896*
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13. Percent of Class Represented by Amount in Row (11)
16.6%
14. Type of Reporting Person
CO
* Beneficial ownership disclaimed. See Item 5 below.
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ITEM 1. SECURITY AND ISSUER.
Name of Issuer and Address of Principal Executive Offices:
Baltimore Gas and Electric Company ("BGE")
Gas and Electric Building
Charles Center
Baltimore, MD 21201
Security to Which This Statement Relates:
Common Stock, No Par Value Per Share
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed by Potomac Electric Power
Company, a District of Columbia and Virginia corporation
("PEPCO"). PEPCO is a public utility engaged in the
generation, transmission, distribution and sale of electric
energy in the Washington, D.C. metropolitan area. PEPCO also
has certain non-utility subsidiaries. The address of its
principal office is 1900 Pennsylvania Avenue, N.W.,
Washington, D.C. 20068.
Pursuant to General Instruction C of Schedule 13D,
the names, business addresses, principal occupations and
citizenship of the executive officers and directors of PEPCO
are set forth in Annex A hereto and are incorporated herein by
reference.
(d) and (e). During the last five years, neither PEPCO nor,
to the knowledge of PEPCO, any of the executive officers and
directors of PEPCO listed in Annex A has (i) been convicted in
a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect
to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Concurrently with entering into the Merger Agreement
(defined in Item 4 below), PEPCO was granted the BGE Option
(defined in Item 4 below). None of the triggering events
permitting exercise of the BGE Option has occurred as of the date
of this Schedule 13D. In the event that the BGE Option becomes
exercisable and PEPCO wishes to purchase for cash the BGE
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Common Stock (as defined in Item 4 below) subject thereto,
PEPCO anticipates that it would fund the exercise price from
working capital or through other sources, which could include
borrowings.
ITEM 4. PURPOSE OF TRANSACTION
PEPCO, BGE, and RH Acquisition Corp., a Maryland
corporation (the "Company"), have entered into an Agreement
and Plan of Merger, dated as of September 22, 1995 (the
"Merger Agreement"), which provides for a strategic business
combination of PEPCO and BGE in a merger transaction (the
"Transaction"). The Transaction, which was unanimously
approved by the Boards of Directors of the constituent
companies, is expected to close shortly after all of the
conditions to the consummation of the Transaction, including
obtaining applicable regulatory approvals, are met or waived.
The regulatory approval process is expected to take
approximately 12 to 18 months.
The Merger Agreement is incorporated herein by
reference to Exhibit 2-1 to PEPCO's Current Report on Form 8-K
dated September 22, 1995 (the "September 8-K"), as filed with
the Securities and Exchange Commission (the "SEC") on
September 26, 1995. The description of the Merger Agreement
set forth herein does not purport to be complete and is
qualified in its entirety by the provisions of the Merger
Agreement.
Under the terms of the Merger Agreement, PEPCO and
BGE each will be merged with and into the Company, with the
Company being the surviving corporation. The Company, which
currently is incorporated in the State of Maryland, also will
be incorporated under the laws of the Commonwealth of Virginia
at or prior to the time of the merger. The name of the
Company will be changed prior to closing to a name agreed upon
by the Boards of Directors of PEPCO and BGE. The utility
businesses of PEPCO and BGE will be combined into an
integrated, non-holding company structure. The non-utility
operations of both companies will be combined, as appropriate,
as subsidiaries of the Company.
Each outstanding share of common stock, par value
$1.00 per share, of PEPCO ("PEPCO Common Stock") will be
converted into the right to receive 0.997 shares of common
stock, no par value per share, of the Company ("Company Common
Stock"). Each outstanding share of common stock, no par value
per share, of BGE ("BGE Common Stock") will be converted into
the right to receive one share of Company Common Stock. As of
August 31, 1995, PEPCO had approximately 118.5 million shares
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of common stock outstanding and BGE had approximately 147.5
million shares of common stock outstanding. Based on such
capitalization, the Transaction would result in the common
shareholders of PEPCO receiving 44.5% of the common equity of
the Company and the common shareholders of BGE receiving the
55.5% of the common equity of the Company. Each outstanding
share of Serial Preferred Stock, par value $50.00 per share,
of PEPCO will be converted into the right to receive one share
of Series B Preferred Stock, par value $50.00 per share, of
the Company with identical rights (including dividend rights)
and designations. Each outstanding share of BGE Preferred
Stock, par value $100.00 per share, will be converted into the
right to receive one share of Series A Preferred Stock, par
value $100.00 per share, of the Company with identical rights
(including dividend rights) and designations. Each
outstanding share of BGE Preference Stock, par value $100.00
per share, will be converted into the right to receive one
share of Company Preference Stock, par value $100.00 per
share, with identical rights (including dividend rights) and
designations.
It is anticipated that the Company will adopt BGE's
dividend policy and that the annual dividend rate as of the
expected 1997 closing date will be $1.67 per share. PEPCO
currently pays $1.66 per share annually, and BGE's annual
dividend rate currently is $1.56 per share.
The Transaction is subject to customary closing
conditions, including, without limitation, the receipt of
required shareholder approvals of PEPCO and BGE, the receipt
of all necessary governmental approvals and the making of all
necessary governmental filings, including approvals of utility
regulators in the District of Columbia, Maryland and certain
other states, the approval of the Federal Energy Regulatory
Commission and the Nuclear Regulatory Commission, and the
filing of the requisite notification with the Federal Trade
Commission and the Department of Justice under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and the
expiration of the applicable waiting period thereunder. The
Transaction also is subject to the receipt of opinions of
counsel that the Transaction will qualify as a tax-free
reorganization and assurances from the parties' independent
accountants that the Transaction will qualify as a pooling-of-
interests for accounting purposes. In addition, the
Transaction is conditioned upon the effectiveness of a
combined registration statement and proxy statement to be
filed by PEPCO, BGE and the Company with the SEC with respect
to shares of Company Common Stock to be issued in the
Transaction and the special stockholder meetings, and upon the
approval of the Company Common Stock for listing on the New
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York Stock Exchange. (See Article VIII of the Merger
Agreement.) The special meetings of the stockholders of PEPCO
and BGE to vote on the Transaction will be convened as soon as
practicable and are expected to be held in the first quarter
of 1996.
The Merger Agreement contains certain covenants
concerning the activities of the parties pending the
consummation of the Transaction. Generally, each of PEPCO and
BGE must carry on its business in the ordinary course
consistent with past practice, except as otherwise permitted
in accordance with a financial plan provided to the other
party, and may not increase dividends on its common stock
beyond the indicated dividend rate for the Company. The
Merger Agreement also contains restrictions on, among other
things, the issuance of capital stock, charter and bylaw
amendments, capital expenditures, acquisitions, dispositions,
incurrence of indebtedness and certain increases in employee
compensation and benefits. (See Article VI of the Merger
Agreement.)
The Merger Agreement provides that, after the
effectiveness of the Transaction (the "Effective Time"), the
corporate headquarters and principal executive offices of the
Company will be located in the Annapolis, Maryland area, but
that the Company also will maintain significant operations in
the District of Columbia and Maryland. The Company's Board of
Directors, which will be divided into three classes, will
consist of a total of 16 directors, seven of whom will be
designated by PEPCO and nine of whom will be designated by
BGE. Mr. Edward F. Mitchell, the current Chairman of the
Board and Chief Executive Officer ("CEO") of PEPCO, will serve
as Chairman of the Board of the Company at the Effective Time
and for a period of one year thereafter. Mr. Christian H.
Poindexter, the current Chairman of the Board and CEO of BGE,
will serve as CEO of the Company. When Mr. Mitchell ceases to
be Chairman, Mr. Poindexter will assume the additional role of
Chairman. Mr. John M. Derrick, Jr., the current President of
PEPCO, will serve as President and Chief Operating Officer of
the Company. Mr. Edward A. Crooke, BGE's current President,
will serve as the Company's Vice Chairman and as Chairman of
the Board of the Company's non-regulated subsidiaries.
The Merger Agreement may be terminated under certain
circumstances, including (1) by mutual consent of PEPCO and
BGE; (2) by either PEPCO or BGE if the Transaction is not
consummated by March 31, 1997 (provided, however, that such
termination date shall be extended to March 31, 1998, if all
conditions to closing the Transaction, other than the receipt
of certain statutory approvals, are capable of being satisfied
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on March 31, 1997); (3) by either PEPCO or BGE if either
PEPCO's or BGE's shareholders vote against the Transaction or
if any state or federal law or court order prohibits the
Transaction; (4) by a non-breaching party if there exists a
breach of any material representation, warranty or covenant
contained in the Merger Agreement which is not cured within
twenty (20) days after notice from the other party; (5) by
either PEPCO or BGE if the Board of Directors of the other
shall withdraw or adversely modify its recommendation of the
Transaction; or (6) by either PEPCO or BGE, under certain
circumstances, as a result of a third-party tender offer or
business combination proposal which the Board of Directors of
such party in good faith and pursuant to the exercise by the
Board of Directors of its fiduciary duties determines to
accept, after the other party has first been given an
opportunity to make adjustments in the terms of the Merger
Agreement so as to enable the Transaction to proceed.
The Merger Agreement provides that if a breach
described in clause (4) of the previous paragraph occurs, the
breaching party must pay the non-breaching party, as
liquidated damages, $10 million in cash in respect of out-of-
pocket expenses. The Merger Agreement also requires payment
of a termination fee of $75 million in cash, plus $10 million
in respect of out-of-pocket expenses, by one party (the
"Payor") to the other if (i) the Merger Agreement is
terminated (x) as a result of the acceptance by the Payor of a
third-party tender offer or business combination proposal, (y)
following a failure of the shareholders of the Payor to
approve the Transaction or (z) as a result of a material
failure of the Payor (other than pursuant to the exercise by
the Board of Directors of its fiduciary duties) to convene a
special shareholder meeting, distribute proxy materials or
recommend the Transaction to its shareholders; and (ii) at the
time of such termination or prior to the meeting of the
Payor's shareholders there shall have been a third-party
tender offer or business combination proposal which shall not
have been rejected by the Payor and withdrawn by such third
party. In addition, if either PEPCO or BGE terminates the
Merger Agreement after the Board of Directors of the other
party withdraws or adversely modifies its recommendation of
the Transaction, a termination fee of $75 million, plus $10
million in respect of out-of-pocket expenses, is payable to
the party that terminates the Merger Agreement. The
termination fees payable by PEPCO or BGE under these
provisions and the aggregate amount which could be payable by
PEPCO or BGE upon a required repurchase of the Option granted
pursuant to the applicable Stock Option Agreement (as
defined below) granted pursuant to the Stock Option Agreements
(as defined below) may not exceed $125 million in the
aggregate. (See Article IX of the Merger Agreement.)
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Concurrently with the Merger Agreement, PEPCO and
BGE entered into reciprocal stock options agreements, each
granting the other an irrevocable option to purchase up to
that number of shares of common stock of the other company
which equals 19.9% of the number of shares of common stock of
the other company outstanding on August 31, 1995.
Specifically, BGE granted PEPCO an irrevocable option to
purchase (the "BGE Option") up to 29,357,896 shares (subject
to adjustment for changes in capitalization) of BGE Common
Stock at an exercise price of $25.925 per share if any of the
circumstances which would trigger a $75 million payment by BGE
to PEPCO occur (the "BGE Stock Option Agreement"). Under the
BGE Stock Option Agreement, the exercise price is payable, at
PEPCO's election, in cash, in shares of PEPCO Common Stock or
a combination thereof. If the BGE Option becomes exercisable,
PEPCO may require BGE to repurchase from PEPCO all or any
portion of the BGE Option, or, if the BGE Option is exercised,
any or all of the shares of BGE Common Stock acquired upon the
exercise thereof, in either case at the price specified in the
BGE Stock Option Agreement. Correspondingly, PEPCO has
granted to BGE an irrevocable option to purchase (together
with the BGE Option, the "Options") up to 23,579,900 shares of
PEPCO Common Stock at an exercise price $21.225 per share
having the same terms (together with the BGE Stock Option
Agreement, the "Stock Option Agreements"). The issuance of
any stock upon the exercise of either Stock Option Agreement
is subject to regulatory approval. (See the Stock Option
Agreements.)
Each party to the respective Stock Option Agreements
has agreed to vote, prior to September 22, 2000, any shares of
the capital stock of the other party acquired pursuant to the
exercise of the Stock Option Agreements or otherwise
beneficially owned by such party on each matter submitted to a
vote of shareholders of such other party for and against such
matter in the same proportion as the vote of all other
shareholders of such other party.
Each Stock Option Agreement provides that, prior to
September 22, 2000, neither party may sell, assign, pledge or
otherwise dispose of or transfer the shares it acquired
pursuant to the Stock Option Agreement ("Restricted Shares")
except as specifically provided for in the Stock Option
Agreement. In addition to the right to require the
repurchase of the Restricted Shares, the party holding such
shares has the right to demand registration of the shares
under the Securities Act of 1933, as amended, for sale in a
public offering, unless the issuer of the shares elects to
repurchase them at their fair market value. Each Stock Option
Agreement also provides that either party may sell any
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Restricted Shares pursuant to a tender or exchange offer
approved or recommended, or otherwise determined to be fair
and in the best interests of such other party's shareholders,
by a majority of the Board of Directors of such other party.
The Stock Option Agreements are incorporated herein
by reference to Exhibits 2-2 and 2-3 of the September 8-K.
The description of the Stock Option Agreements set forth
herein does not purport to be complete and is qualified in its
entirety by the provisions of the Stock Option Agreements.
Except pursuant to the terms of the Stock Option
Agreements and the Merger Agreement, PEPCO has no plans or
proposals which would result in the acquisition or disposition
of BGE Common Stock or any other action enumerated in Item 4
of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b). Pursuant to the BGE Stock Option Agreement,
PEPCO has the right to acquire 29,357,896 shares (subject to
adjustment for changes in capitalization) of BGE Common Stock,
representing 16.6% of the outstanding shares of such Common
Stock on August 31, 1995, as computed in accordance with Rule
13d-3(d)(1) under the Securities Exchange Act of 1934, as
amended. If the BGE Option is exercised and PEPCO purchases
the BGE Common Stock, PEPCO will have sole voting and sole
dispositive power with respect to such shares of BGE Common
Stock, subject to the limitations contained in the BGE Stock
Option Agreement. Because the BGE Option is not currently
exercisable, and because, if it were to become exercisable,
issuance of BGE Common Stock thereunder would be subject to
regulatory approval, PEPCO disclaims beneficial ownership of
the shares of BGE Common Stock subject to the BGE Option. The
number of shares of BGE Common Stock, if any, owned by each of
the executive officers and directors of PEPCO is set forth on
Annex A opposite the name of such executive officer or
director.
(c). Except for the execution and delivery of the BGE Stock
Option Agreements on September 22, 1995, there have been no
transactions by PEPCO, or, to the knowledge of PEPCO, any of
its executive officers or directors, in BGE Common Stock during
the sixty days preceding the date of this Schedule 13D.
(d). None.
(e). Not applicable.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELA-
TIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Other than the Merger Agreement and the Stock Option
Agreements (see descriptions of each in Items 3 and 4 above),
which are included or incorporated by reference in this
Schedule 13D, and agreements referred to therein, there are no
contracts, arrangements, understandings or relationships
between PEPCO and any other person, or, to the knowledge of
PEPCO, among any of PEPCO's executive officers and directors
or between any of PEPCO's executive officers and directors and
any other person, with respect to any securities of BGE.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1) Agreement and Plan of Merger, dated as of
September 22, 1995 (incorporated by
reference to Exhibit 2-1 of PEPCO's
Current Report on Form 8-K, dated
September 26, 1995).
2) Pepco Stock Option Agreement, dated as of
September 22, 1995 (incorporated by
reference to Exhibit 2-2 of PEPCO's
Current Report on Form 8-K, dated
September 26, 1995).
3) BGE Stock Option Agreement dated as of
September 22, 1995 (incorporated by
Reference to Exhibit 2-3 of PEPCO's
Current Report on Form 8-K, dated
September 26, 1995).
4) News Release of Potomac Electric Power
Company and Baltimore Gas and Electric
Company, dated September 25, 1995
(incorporated by reference to Exhibit 99
of PEPCO's Current Report on Form 8-K,
dated September 26, 1995).
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SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth
in this statement is true, complete and correct.
POTOMAC ELECTRIC POWER COMPANY
/s/ Earl K. Chism
By:
Earl K. Chism
Vice President and Comptroller
Date: October 2, 1995.
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Annex A
INFORMATION RELATING TO
EXECUTIVE OFFICERS AND DIRECTORS
POTOMAC ELECTRIC POWER COMPANY
The following is a list of the executive officers and
directors of Potomac Electric Power Company, and the number of
shares of BGE Common Stock, if any, owned by each such executive
officer and director, as of the date of this Schedule 13D. Each
executive officer and director who owns shares of BGE Common Stock
has sole voting and dispositive power with respect to such shares.
To the knowledge of Potomac Electric Power Company, all of the
following executive officers and directors are citizens of the
United States. The business address for each of the executive
officers is 1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068.
Executive Officers:
Number of Shares of
Name Title BGE Common Stock Owned
Edward F. Mitchell Chairman of the None.
Board and Chief
Executive Officer
John M. Derrick, Jr. President, Chief None.
Operating Officer and
Director
H. Lowell Davis Vice Chairman and Chief None.
Financial Officer
William T. Torgerson Senior Vice President, None.
General Counsel and
Secretary
Dennis R. Wraase Senior Vice President None.
Iraline G. Barnes Vice President None.
Earl K. Chism Vice President and None.
Comptroller
Kirk J. Emge Vice President None.
Susann D. Felton Vice President None.
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Executive Officers (Cont.):
Number of Shares of
Name Title BGE Common Stock Owned
William R. Gee, Jr. Vice President None.
Robert C. Grantley Vice President None.
Anthony J. Kamerick Vice President None.
Anthony S. Macerollo Vice President None.
John D. McCallum Vice President None.
James S. Potts Vice President None.
William J. Sim Vice President None.
Andrew W. Williams Vice President None.
Outside Directors:
Number of Shares of
Name and Occupation Business Address BGE Common Stock Owned
Roger R. Blunt, Sr. 6432 Bock Road None.
Chairman of the Board, Oxon Hill, MD 20745
President and Chief
Executive Officer, Blunt
Enterprises, Inc.
A. James Clark 7500 Old Georgetown Road None.
Chairman of the Board Bethesda, MD 20814
and President, Clark
Enterprises, Inc.
Richard E. Marriott 10400 Fernwood Road None.
Chairman of the Board, Washington, DC 20058
Host Marriott Corporation
David O. Maxwell 5335 Wisconsin Avenue 3,000
Retired Washington, DC 20015
Floretta D. McKenzie 555 Thirteenth St., N.W. None.
President, The Washington, DC 20004
McKenzie Group
Ann D. McLaughlin 4320 Garfield St., N.W. None.
President, Federal Washington, DC 20007
City Council; Vice
Chairman, The Aspen
Institute
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Outside Directors (Cont.):
Number of Shares of
Name and Occupation Business Address BGE Common Stock Owned
Peter F. O'Malley 11785 Beltsville Drive None.
Of Counsel, O'Malley, Calverton, MD 20705
Miles, Nylen & Gilmore,
P.A.
Louis A. Simpson P.O. Box 1943 None.
President and Chief Rancho Santa Fe, CA 92067-1943
Executive Officer of
Capital Operations,
GEICO Corporation
A. Thomas Young 6801 Rockledge Dr. 2,835
Retired Bethesda, MD 20814
