SJW Group (NYSE: SJW) and Connecticut Water Service, Inc. (NASDAQ: CTWS) announced in March that both companies’ boards of directors have unanimously approved a definitive agreement to combine through a merger of equals to create the third-largest investor-owned water and wastewater utility in the United States, based on pro forma enterprise value and combined rate base.
The combined company will have a strong multi-state presence with high-quality and well-run operations, and constructive regulatory relationships in California, Connecticut, Maine and Texas. It will serve more than 1.5 million people with more than 700 employees. In addition to expanding its market presence, the increased scale and more diverse geographic footprint of the new organization provide the opportunity for investments in service and reliability that can enhance value for shareholders as well as for customers and communities. The combined company would have had operating revenue of approximately $496 million and recurring net income of $74 million based on a 2017 pro forma basis.
Under the terms of the agreement, Connecticut Water shareholders will receive 1.1375 shares of SJW Group common stock for each share of Connecticut Water common stock they own, the equivalent of $61.86 per share, or about $750 million in the aggregate, based on SJW Group’sclosing stock price as of March 14, 2018, and the agreed upon exchange ratio. Following closing of the transaction, SJW Group shareholders will own approximately 60 percent of the combined company, and Connecticut Water shareholders will own approximately 40 percent, on a fully diluted basis. Based on each company’s closing share price as of March 14, 2018 and the 1.1375x transaction exchange ratio, the combined company would have a pro forma $1.9 billion equity value and a $2.6 billion enterprise value.
Eric W. Thornburg will serve as Chairman, President and Chief Executive Officer of the newly-merged company. David C. Benoit will serve as President, New England Region, overseeing the New England operations, including Connecticut Water. In addition, Andrew R. Gere will continue serving as President and Chief Operating Officer of San Jose Water, Thomas Hodge will continue serving as President of SJWTX, Inc.and Richard Knowlton will continue serving as President of Maine Water Company . James Lynch will serve as Chief Financial Officer of the newly combined company, Kristen Johnson will serve as Chief Human Resource Officer, Suzy Papazian will serve as General Counsel and Corporate Secretary, Andrew Walters will serve as Chief Administrative Officer and Maureen Westbrook will serve as Senior Vice President of External Affairs.
The combined company’s headquarters will be located in San Jose, Calif., with the New England headquarters located in Clinton, Conn.
Thornburg , President and Chief Executive Officer of SJW Group, said, “This transformational merger of equals joins two leading and complementary water utility companies to create significant long-term benefits for shareholders, customers, employees and the communities we serve. The combination will establish a premier organization with substantial opportunities for new investment across a diverse set of geographies and an improved ability to serve our customers.”
Thornburg continued, “Having worked closely with the teams at both SJW Group and Connecticut Water, I know that we both share a passion for delivering life-sustaining water service to families and communities, serving our colleagues, being good stewards of the natural resources entrusted to us and creating shareholder value through prudent capital deployment. I am confident we have a strong cultural fit and that our people will build a unified team well-positioned to drive future growth.”
David C. Benoit , President and Chief Executive Officer of Connecticut Water, said, “In addition to delivering a premium of 18 percent to Connecticut Water shareholders, this compelling combination honors our unique public health mission and entrepreneurial vision. Together, we create a new larger, stronger company capable of delivering greater value and benefits for our shareholders, customers, employees and communities than either company could deliver on its own.”
Benoit continued, “The new company’s combined leadership team is closely aligned in their focus on a ‘culture of service’ and honoring each company’s strong record of environmental stewardship. We intend to carry forward the best practices from both companies to ensure we deliver on our commitments to our shareholders, customers, employees and communities, and realize the substantial value of our unique combination.”
