Exelon Corporation, owner of the largest power companies in Illinois and Pennsylvania, agreed to buy New Jersey’s Public Service Enterprise Group Inc. for about $12.8 billion to create the largest American utility operator.

Stockholders of Public Service will get 1.225 Exelon shares for each share they hold, the companies said in a statement yesterday. The price values Newark, N.J.-based Public Service at $51.28 a share, 8.5% more than its close on December 17, and marks the largest American utility acquisition in history.

Exelon’s chief executive, John W. Rowe, has sought an acquisition for the Chicago-based company to make up for an expected drop in revenue when Illinois expands electricity competition in 2007. The company expects to boost profit by cutting 1,400 jobs and reducing downtime at Public Service’s nuclear reactors.

“We have a new bellwether of unmatched size and strength in the utility business,” said John Bartlett, a fund manager at W.H. Reaves & Company in Jersey City, N.J., which held 2.1 million Exelon shares and 1.5 million Public Service shares as of September 30.”This transaction will create a very powerful company with some very visible opportunities to bring a high quality of management to a new base of assets.”

Shares of Exelon climbed $1.19, or 2.8%, to $43.05 in New York Stock Exchange composite trading. The company said it will boost its dividends by 14% to match Public Service’s shareholder payout. Public Service surged $3.29, or 7%, to $50.56.

The purchase includes assumption of $14.1 billion in debt, which will about double Exelon’s borrowings. Exelon will add 3.6 million utility accounts, as well as coal-fuel power stations in three states. The company, already the largest American owner of nuclear power plants, will get five reactors, including four units now jointly owned with Public Service.

Including assumed debt, the acquisition is more than twice as large as the two biggest American utility deals on record. The 1998 purchase of Oregon’s PacifiCorp by Scottish Power Plc and American Electric Power Company’s acquisition of Central & South West Corporation in 2000 were both valued at more than $12 billion.

J.P. Morgan Securities and Lehman Brothers Inc. are advising Exelon on the purchase, and Morgan Stanley is financial adviser to Public Service, the companies said. J.P. Morgan and Lehman will share $19 million in fees, and Morgan Stanley will get $30 million.

The Exelon deal comes at the tail end of the busiest quarter for mergers in more than four years. There were more than $120 billion in deals announced last week, including Sprint Corporation’s $41 billion purchase of Nextel Communications.

After the Public Service purchase, Exelon will have about $27 billion in revenue and $3.2 billion in net income annually. Charlotte, N.C.-based Duke Energy Corporation, which had revenue of $22.2 billion, is currently the biggest American utility company. Exelon, already the biggest American utility owner by market value, will boast more than 9 million customer accounts.

Exelon was formed in 2000, through the $9.77 billion merger of Chicago’s Unicom Corporation, owner of Commonwealth Edison, and Peco Energy Company, parent of Philadelphia Electric.

Public Service owns New Jersey’s largest utility, which supplies power to 75% of the state’s 8.64 million residents, the company said.

Exelon and Public Service estimated pretax savings from combining the companies at $400 million in the first full year and $500 million annually by the second year. The company, which will be known as Exelon Electric & Gas, will cut the combined labor force of 28,000 by 5%, mainly through attrition and retirements, an Exelon spokesman, Don Kirchoffner, said.

The purchase, which is expected to close in 12 to 18 months, is subject to approval by the New Jersey Board of Public Utilities. The board last year cut power-distribution rates by 11% for Jersey Central Power & Light after its acquisition by Akron, Ohio-based FirstEnergy Corporation. The state also required FirstEnergy to absorb $300 million of the former GPU Incorporated’s losses from buying power while rates were frozen.

Mr. Rowe, 59, halted a bid to buy neighboring Illinois Power Company last year, after state lawmakers wouldn’t accept his terms.

Exelon recognizes that New Jersey regulators will want a rate cut to ensure that Public Service customers share in savings from the acquisition, Mr. Rowe said at a press conference in Newark.

“We’d have to look at any deal, and if we found it was in the best interests of the state of New Jersey, we’d approve it,” said a member of the Board of Public Utilities, Jack Alter, in an interview before the Exelon purchase was announced.

New Jersey’s population probably rose 2.7% from April 2000 to July 2003, outpacing Illinois and Pennsylvania, according to American Census Bureau estimates. All three states lagged behind the American average of 3.3% for the period.

Profits for New Jersey power producers have narrowed in the past three years under an auction system through which utilities buy most of their electricity.

Exelon plans to sell Public Service’s remaining overseas assets, Mr. Rowe said on the call.

Before yesterday, Exelon’s shares had climbed 26% this year, outpacing those of other utility companies in the Standard & Poor’s 500 as well as Public Service, which lagged behind the industry average with a gain of less than 8%. Public Service owns New Jersey’s largest utility.