(Reuters) - Exelon Corp, the largest U.S. nuclear power producer, said it would buy Pepco Holdings Inc for $6.83 billion to create the biggest electric and gas utility in the U.S. Mid-Atlantic region.
The deal will expand EXELON (EXC.NY)s regulated holdings, giving it assets that have stable returns.
Exelon's $27.25 per share cash offer represents a near 20 percent premium to Pepco Holdings' Tuesday close of $22.79 on the New York Stock Exchange.
Pepco shares were trading at $26.56 before the bell on Wednesday.
Pepco operates utilities in the Washington area, Delaware, Maryland and New Jersey, serving about 2 million customers.
Exelon's utilities deliver electricity and natural gas to more than 6.6 million customers in central Maryland, northern Illinois and southeastern Pennsylvania.
The combined entity will serve about 10 million customers.
The deal, expected to close in the second or third quarter of 2015, is subject to approval by the Federal Energy Regulatory Commission and several state commissions.
The deal is expected to "significantly" add to Exelon's adjusted earnings in the first full year after closing, the company said.
Barclays, Goldman Sachs & Co and Loop Capital Markets are serving as financial advisers to Exelon. Kirkland & Ellis LLP is the legal counsel.
Lazard is Pepco Holdings' financial adviser. Sullivan & Cromwell LLP and Covington & Burling LLP are the legal counsel.
(Reporting by Swetha Gopinath in Bangalore; Editing by Saumyadeb Chakrabarty)