The Law Office of Lynnette Ariathurai A Professional Corporation

Energy business merger faces opposition

A company may decide to buy another business entity if it could result in a larger portion of the market share. Doing so may help the company's business model become more profitable. Some industries, however, are heavily regulated by government agencies when it comes to approving a proposed business merger. This is certainly true in the utilities and energy industry in California and elsewhere.

Heavy scrutiny from regulating agencies can become a problem when opposition exists to a proposed merger in the utility and energy sector. This is what Exelon has been experiencing as the electric company attempts to obtain approval of its proposed $6.4 billion acquisition of Pepco Holdings. The proposed merger would result in a single electricity provider over a specific geographical region.

The Institute for Energy Economics and Financial Analysis (IEEFA) is strongly against approval of the merger. The Institute is a think tank which focuses on environmental concerns surrounding the energy sector. The IEEFA is asking government regulators to reject the proposed merger because the business model would rely too heavily on aging nuclear power plants. It also argues that the merger would result in higher rates as well as be detrimental to renewable energy goals.

If a California company is experiencing a similar situation regarding a proposed business merger, it may be necessary to take legal action in order to complete the transaction. This will require a careful assessment of the underlying issues, as well as research regarding the applicable state and federal laws relevant to the particular industry. Each industry is subject to a wide range of laws and regulations which could affect any attempt to expand through the acquisition of another company. Many times, it may become necessary to litigate unresolved issues in court in order to achieve final approval of  merger.

Source: The Washington Post, "District should reject Exelon-Pepco merger, energy think tank says in report", Thomas Heath, Jan. 21, 2015

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