Billing it as a modified merger of equals, the companies said FPL Group Inc. had agreed to pay about $11 billion for Constellation, the parent of Baltimore Gas and Electric Co., creating the nation's largest energy company with combined annual revenue of $27 billion.
Though Constellation Chairman and Chief Executive Officer Mayo Shattuck III will continue to run the company's merchant power business, FPL's Lewis Hay III will be the top executive, FPL stockholders will own 60 percent of the shares, and the Florida company will name a majority of the corporate directors.
Provisions of the deal made public yesterday allayed some of the fears of widespread job losses and a pullout from Baltimore by Constellation. Instead, some said yesterday, Baltimore could be poised to become a hub of power for an even bigger energy producer and trader.
If the deal gets shareholder and regulatory approval, the merged company will adopt the better-known Constellation name, and Baltimore will remain home to merchant power operations, the fastest growing part of the business. The company will maintain dual headquarters in Baltimore and Juno Beach, Fla., for at least five years. And it will pledge to continue the same levels of philanthropic contributions in each community for at least a decade.
"It would appear in terms of the job growth portion of this, much of that will happen in Baltimore and Maryland," said Baltimore Mayor Martin O'Malley, who spoke with Shattuck before yesterday's announcement. "The nature of this thing as strategic merger rather than an acquisition is welcome news to my ears, and I don't think you'll see a net loss of jobs as a result. ... Baltimore is where the job growth is envisioned in the years ahead."
Aris Melissaratos, Maryland's secretary of business and economic development, said after speaking with members of Constellation's management team that he views the proposed deal as a positive step for both companies, both sets of shareholders and both Maryland and Florida.
"They looked out for the interests of the Maryland community and Florida community, and I think the management teams are very committed," he said.
"These are two quality companies that are merging. Constellation has turned itself around and is thriving in the new unregulated world. They have been innovative, and that innovation will serve the combined entity very well. I think the management team of Constellation will be the ones to lead the combined corporation into the new markets."
Gov. Robert L. Ehrlich Jr. said through a spokesman that it is premature to comment on the proposal until the regulatory process has played itself out.
"Clearly, the governor wants Maryland's economic interest to be a priority through this process," said Henry Fawell, an Ehrlich spokesman. "But he is reserving judgment."
The pledge to maintain the level of philanthropic giving also was seen as reassurance that Constellation will maintain its involvement. "I see this as all positive," said Betsy S. Nelson, executive director of the Association of Baltimore Area Grantmakers, a membership group of foundations and corporate-giving programs, which includes Constellation Energy Group. "Clearly, this is a major commitment they've made. They've been an exemplary corporate citizen, and this indicates to me they will continue to be."
Last year, Constellation gave $8.8 million in the area and is one of the two largest contributors to the United Way. It gives many $5,000 to $10,000 grants to small nonprofits. Its executives and managers serve on the boards of hundreds of organizations.
Executives of Constellation and FPL said yesterday that no layoffs are expected in the next year but that an undetermined number of jobs will be lost as a result of the merger, probably back-office functions through retirements and attrition. They also said they expect more job creation in Baltimore as the merchant power business expands. Company executives did not release specific numbers.
"Whenever you have two large companies merging like this, there's going to be some duplication somewhere within the company, so you would anticipate there would have to be some job loss down the road," said Donald C. Fry, president of the Greater Baltimore Committee, a business and civic leadership group. "What that will be we'll have to wait to see. It would have been much greater if there were just one headquarters."
"On a short-term basis, it certainly appears that a lot of the concern and apprehension that people had about Constellation leaving and no longer having a presence in Baltimore appears not to be of major concern right now," Fry said. "This could end up being a very positive thing for Baltimore, as we'll have a stronger national company with the two companies merged that has a significant presence still in Baltimore."
Christian H. Poindexter, Shattuck's predecessor as chief executive officer of Constellation, said he would be surprised at a significant loss in jobs.
"They're going to continue to grow the marketing and trading and generation businesses, and my understanding is the headquarters of the business will be here," Poindexter said. "I think it's a good marriage, and I think Baltimore should benefit from having a bigger, stronger company. Knowing the business and both of these companies, I would think they would have an ongoing need for significant operations in Baltimore."
It is unclear how the company will structure its headquarters after five years.
"There's a concern [about job loss], but given all the attributes of downtown Baltimore and the economy, I'm feeling we can make it difficult for Constellation to change their headquarters from Baltimore to Florida," said Kirby Fowler, president of the Downtown Partnership.