February 12, 2010 (FinancialWire) — FirstEnergy (NYSE: FE) and Allegheny Energy, Inc. (NYSE: AYE) said that both companies’ boards of directors have unanimously approved a definitive agreement in which the companies would combine in a stock-for-stock transaction.

Under the terms of the agreement, Allegheny shareholders would receive 0.667 shares of FirstEnergy common stock in exchange for each share of Allegheny they own. Based on the closing stock prices for both companies on February 10, 2010, Allegheny shareholders would receive a value of $27.65 per share, or $4.7 billion in the aggregate.

FirstEnergy will also assume around $3.8 billion in Allegheny net debt. The price per share represents a premium of 31.6 percent to the closing stock price of Allegheny on February 10, 2010, and a 22.3 percent premium to the average stock price of Allegheny over the last 60 days ending February 10, 2010. Following the completion of the merger, the plan calls for FirstEnergy shareholders to own around 73 percent and Allegheny shareholders would own around 27 percent of the combined company.

FirstEnergy said it expects the transaction to be accretive to its earnings in the first year following the close. The companies said they expect to complete the transaction within 12-14 months.

The combination creates a leading regional energy provider with ten regulated electric distribution companies providing electric service to more than six million customers in Pennsylvania, Ohio, Maryland, New Jersey, New York, Virginia and West Virginia.

It will also operate 20,000 miles of high-voltage transmission lines connecting the Midwest and Mid-Atlantic, and around 24,000 megawatts f generating capacity from a mix of regional coal, nuclear, natural gas, oil and renewable power.

The combined company would also have more than 2,200 MW of renewable energy, including hydroelectric, contracted wind and pumped-storage capacity.

Ohio-based FirstEnergy currently serves 4.5 million customers within 36,100 square miles of Ohio, Pennsylvania, New Jersey and New York.

Pennsylvania-based Allegheny owns and operates 9,700 MW of generating capacity and delivers electric service to around 1.6 million customers in Pennsylvania, West Virginia, Maryland and Virginia.

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