Exelon Corp. (EXC), the nation's largest nuclear power company, has agreed to buy New Jersey utility Public Service Enterprise Group Inc. (PEG) for $13.2 billion in stock, creating the nation's largest utility, the companies said on Monday.

Exelon said the purchase of PSEG, with which it already owns some nuclear plants, would boost earnings immediately. The companies said the deal could close by the end of 2005, but some analysts said regulatory challenges may arise.

The deal values PSEG at $52.84 per share, a nearly 12 percent premium over the company's closing stock price on Friday and a nearly 16 percent premium over its closing price on Thursday, before word of the deal leaked out.

The acquisition will increase Exelon's generating capacity by about 50 percent, to 52,000 megawatts. A megawatt powers about 1,000 homes.

The new company will be called Exelon Electric & Gas (search) and will serve 7 million electricity customers and 2 million gas customers in Illinois, New Jersey and Pennsylvania.

The value of the deal rose from $12.8 billion to $13.2 billion as Exelon shares gained $1.29, or 3 percent, to $43.15 on the New York Stock Exchange (search). PSEG share rose $2.73, or 5.8 percent, to $50.

The companies said they expect to save $400 million before taxes in the first year after the deal closes through efficiencies in areas including generation, transmission, distribution and power marketing, and through increased production.

The combined work force of 28,000 is expected to be cut by 5 percent, they said. About 38 percent of the post-merger work force will be in New Jersey.

"It's a great fit for both companies," said Doug Wilson, an analyst for the Utility Fund (CSUAX) at Cohen & Steers Capital Management Inc., which owned more than 2 million shares in both companies as of Sept. 30.

But Wilson also said the companies might have problems getting regulatory approval. Regulators watch closely for too much dominance in one market.

Exelon said it expects to raise it annual dividend to $1.83 from $1.60 in 2005 before the close of the deal, assuming the acquisition closes by the end of 2005.

The company will have its headquarters in Chicago, where Exelon is now located. Its energy trading operations and nuclear headquarters will be in Pennsylvania, and the generation company's combined headquarters will be in Newark.

It expects to have regulatory approvals within 12 to 15 months and said it would seek shareholder approval in the second quarter of 2005. Agencies including the Federal Energy Regulatory Commission (search), the Nuclear Regulatory Commission (search) and state utility commissions must approve the deal.

Sanford C. Bernstein analyst Hugh Wynne said in a research note that the companies' similar regulatory structures will ease the approval process. In particular, he noted that nuclear regulators may be pleased that PSEG, which has had issues with operating its plants, will be operated by highly rated Exelon.

J.P. Morgan Securities and Lehman Brothers are serving as financial advisers to Exelon, while Morgan Stanley is advising PSEG.