American Water Works Company, Inc. (NYSE:AWK) and Essential Utilities, Inc. (NYSE:WTRG) announced Monday that their boards unanimously approved an all-stock, tax-free merger. The move will create a dominant, regulated water and wastewater utility across the United States.
Based on stock prices as of Oct. 24, the combined entity is projected to have a market capitalization of $40 billion and an enterprise value of $63 billion.
Transaction Details
The deal is structured so that Essential stockholders will receive 0.305 shares of American Water for each share owned at closing, representing an approximate 10% premium.
The merged utility will service roughly 4.7 million connections across 17 states and 18 military installations, leveraging an estimated combined rate base of $29.3 billion. American Water’s existing shareholders will hold about 69% of the combined company.
Also Read: Where American Water Works Co Stands With Analysts
Financial and Operational Outlook
Executives anticipate the enhanced scale will significantly support crucial infrastructure investment and boost operational efficiency.
John C. Griffith, American Water President and CEO, stated, “This combination brings together two industry leaders united by our shared mission to provide safe, clean, reliable and affordable water and wastewater services to our customers. By joining forces with Essential, the combined company’s enhanced scale and operational efficiency will support continued investment in our critical infrastructure, enabling us to continue providing superior customer service at an affordable rate”.
The transaction is expected to be immediately accretive to American Water’s EPS in the first year, and management plans to maintain long-term EPS and dividend growth targets of 7-9%.
The combined entity also benefits from Essential’s natural gas business, Peoples Natural Gas, which management notes is growing its rate base at an annual rate exceeding 10%.
Christopher H. Franklin, essential chairman and CEO, will transition to executive vice chair of the board. He said, “Together, we will have expertise, financial strength and regulatory credibility to continuously improve our infrastructure and meet the evolving needs of our customers. American Water and Essential will continue to enable our communities to thrive.”
Griffith will continue as president and CEO. The combined company retains the American Water name and its headquarters in Camden, New Jersey.
The acquisition is expected to be completed by the end of the first quarter of 2027, subject to regulatory approvals. As utility providers improve vital infrastructure, the acquisition of Hydra-Stop by Pentair is a recent example of a deal supporting sustainable water flow in growing cities.
Price Action: AWK shares are trading 2.60% lower at $137.91, and WTRG is down 1.14% at $40.74 as of Monday’s check.
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