updated 12/19/2005 8:29:43 AM ET 2005-12-19T13:29:43

Energy companies FPL Group Inc. and Constellation Energy Group Inc. confirmed Monday they have agreed to merge in an $11 billion deal that will create the nation's largest energy supplier.

Under the terms of the transaction, each share of Constellation Energy held will be converted into 1.444 shares at the time of the merger, while each FPL Group share will be converted into one share of Constellation Energy at the time of the merger.

Shareholders of Constellation Energy will receive a premium of about 15 percent, the companies said, and will own about 40 percent of the new company. Constellation Energy shares closed at $61.62 on the New York Stock Exchange Friday.

Based on both companies' announced earnings expectations, the transaction is expected to add to earnings in the first full year of combined operations, excluding transaction and integration costs and the positive effects of purchase accounting.

Juno Beach, Fla.-based FPL Group, with operations nationwide, derives most of its revenue from its utility subsidiary, Florida Power & Light. Constellation Energy, based in Baltimore, operates Baltimore Gas and Electric, but the firm gets most of its sales from nonregulated operations.

The combined company, to be called Constellation Energy, will have a market capitalization of about $28 billion, revenue of $27 billion and total assets of $57 billion.

In addition, the combined company is expected to generate at least $200 million to $250 million in pretax annual savings before merger-related charges by the end of the third post-merger year. The majority of the savings are expected to result from consolidation of non-regulated business unit operations, sharing of best practices, improved procurement strategies, and consolidation of systems and support activities.

The new company's dividend is expected to be the same as FPL Group's dividend immediately before the merger. FPL paid a quarterly dividend of 35.5 cents on Dec. 15.

Lewis Hay, chairman, president and chief executive of FPL Group, will become chief executive officer of Constellation Energy. Mayo A. Shattuck, chairman, president and chief executive of Constellation Energy, will become chairman of the board of Constellation Energy.

The deal has been approved by the boards of both companies. Shareholders are expected to vote on the deal in the second quarter of 2006, and the companies expect to receive the necessary regulatory approvals in nine to 12 months.

The New York Times reported news of the merger talks last week.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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