Exelon Corp.'s proposed acquisition of Pepco Holdings Inc. could bring together a total of $32.4 billion in employee benefit and other investment management assets.
Chicago-based Exelon announced Wednesday an agreement with Pepco to acquire the Washington-based company in an all-cash deal valued at $8.6 billion, according to an Exelon statement. Pepco stock traded at $26.74 in midday trading Wednesday.
Exelon had $13.571 billion in defined benefit assets and $15.459 billion in pension obligations for an 87% funded status. Its 401(k) plans had assets of $5.26 billion, including $2.2 billion in Exelon stock. Pepco had $2.12 billion in defined benefit assets and $2.238 billion in pension obligations. Its 401(k) assets total $897 million, including $122 million in Pepco stock.
Exelon and Pepco's defined benefit plans have contrasting investment management strategies.
Exelon has 65% of its defined benefit assets in return-seeking strategies such as equities (45%) and alternatives (20%) which include hedge funds, real estate and private equity. The rest is mainly in fixed income, mostly in a liability-driven investing strategy.
Pepco has most assets in liability-driven investing, with 62% in fixed income. Its return-seeking strategy has 31% in equities and a combined 7% in private equity and real estate.
In addition, Exelon has $2.233 billion and Pepco $368 million in non-pension retirement-related benefit assets. Exelon also has $8 billion invested in a nuclear decommissioning trust.
Douglas Brown, Exelon senior vice president and chief investment officer, declined to comment, said Paul Adams, Exelon spokesman. Marcus Beal, Pepco spokesman, said Pepco executives deferred comment to Exelon executives.
All asset data is from company 10-K filings with the Securities and Exchange Commission as of Dec. 31, except 401(k) data, which is as of Dec. 31, 2012.
The proposed acquisition, pending Pepco shareholder and regulatory approval, is expected to close by Sept. 30, 2015.