Consolidated Edison and Orange and Rockland Utilities agreed tomerge with ConEd acquiring all the common stock of O&R for$58.50 per share in a deal worth about $790 million. O&R wouldbecome a wholly owned subsidiary of ConEd. The transaction would beaccounted for as a purchase and is expected to be accretive toConEd’s earnings per share after the first year.

The combined company would provide energy services to nearly 3.3million electric customers and 1.2 million gas customers insouthern New York, northern New Jersey and northeasternPennsylvania.

“A combination of Con Edison and O&R is a natural fit. Thistransaction is consistent with our strategy of growing our coretransmission and distribution business and enables us to leveragewhat both companies do best to better serve all customers,” saidEugene R. McGrath, chairman, president and CEO of ConEd. Ourcontiguous service territories will allow us to generatesignificant synergies and operating efficiencies.” At $58.50 pershare in cash, the deal represents a premium over O&R’s closingprice Friday of $42.25.

ConEd said it expects net merger savings after implementation ofup to $50 million per year from the elimination of duplicatecorporate and administrative programs and greater efficiencies inoperations and business processes. ConEd will seek to minimizework-force effects of the merger through reduced hiring, attritionand other measures. All union contracts will be honored. ConEdwould maintain two operating utilities: ConEd Co. of New York, andOrange and Rockland Utilities. Each utility will continue tooperate under its respective name. Under the agreement, ConEd wouldalso appoint one member of the O&R board to its board.

The restructuring plans of ConEd Co. of New York and Orange andRockland Utilities would continue. Both companies’ restructuringplans provide for customer-choice programs, rate reductions anddivestiture of generation assets. Rockland Electric Co. and PikeCounty Light & Power Co., subsidiaries of Orange and RocklandUtilities, also have submitted restructuring proposals which arepending in New Jersey and Pennsylvania, respectively.

The merger is conditioned, among other things, upon theapprovals of O&R shareholders and various regulatory agencies,which the companies anticipate can be obtained in 12 months.

Orange and Rockland serves about 273,600 electric customers in a1,350-square-mile region with a population of about 671,000 peoplein southeastern New York State, as well as in adjacent sections ofnorthern New Jersey and northeastern Pennsylvania. O&R alsodistributes gas to about 107,000 customers in New York andPennsylvania. ConEd has more than $7 billion in annual revenues andabout $15 billion in assets.

Following the deal’s announcement, Moody’s Investors Serviceconfirmed the ratings of ConEd of New York while maintaining itsstable outlook, and confirmed the ratings of Orange and RocklandUtilities and its subsidiary Rockland Electric while changing theoutlook for those ratings to positive from stable. The outlookchange for Orange and Rockland reflects expectations that it canimprove its overall credit quality by seeking to partner with astronger and significantly larger company.

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