Increased Merger Ante Adds Value to CT Water Stock

TOLLAND, CT — A California company has upped the ante in its bid to merge with Connecticut Water.

Both SJW Group and Connecticut Water Service, Inc. on Monday announced that they have "amended" the terms of their previously announced merger agreement from a stock-for-stock transaction to an all-cash acquisition of all outstanding common shares of Connecticut Water by SJW Group for $70 per Connecticut Water common share.

The cash transaction, which has a value of $1.1 billion and an equity purchase price of $843 million, is expected to be "immediately accretive" to SJW Group’s earnings per share in 2019 (post-close), increasing each year thereafter to" high single-digit percentage EPS accretion in 2021," according to the announcement.

The SJW Group and Connecticut Water Service Board of Directors each approved the amended merger agreement to, "help facilitate the closing of the companies’ transformative combination and ensure that their shareholders, customers, employees and communities realize its significant benefits," according to the announcement.

The respective boards also "believe that the $70 per share cash consideration will resolve any market distractions resulting from otherwise-inferior proposals for Connecticut Water."

The amended merger agreement was unanimously approved by the Connecticut Water Board of Directors and by all SJW Group directors other than Eric Thornburg, who abstained from voting due to his ownership of Connecticut Water shares and the all-cash nature of the acquisition.

“The amended agreement reflects our continued and shared commitment with Connecticut Water to combine our two companies to create a leading national water and wastewater utility,” said Robert Van Valer, the lead independent director of SJW Group’s Board of Directors and trustee of the Roscoe Moss Jr. Revocable Trust, which is the largest stockholder of SJW Group. “Under the revised terms, the combination will substantially enhance our long-term value and significantly benefit our shareholders, employees, customers and local service area communities. Together, we will have a multi-state presence with a broader and more attractive growth platform and capacity to invest in our infrastructure, maintain our local operations and focus, provide greater opportunities for our employees and increase shareholder value over the immediate- and long-term.”

Carol P. Wallace, Chairman of the Connecticut Water Service Board, said, “Over the last two years, the Connecticut Water Service Board of Directors has conducted a thorough process considering various alternatives for a merger, acquisition or other strategic transaction designed to serve the best interest of Connecticut Water shareholders, customers, and employees and communities."

She said this amended agreement "achieves that objective" by delivering a 33 percent premium and "substantial cash value" to shareholders while "also honoring all the stakeholder commitments of the previously announced merger."

She added, "This transaction continues to provide long-term benefits for customers, employees and communities with experienced local employees, leadership team and the New England headquarters remaining in Clinton. We are confident that SJW Group is the ideal partner for Connecticut Water and look forward to achieving continued growth and success as the third-largest investor-owned pure-play water and wastewater utility in the United States.”

Under the terms of the amended agreement, SJW Group will acquire all of the issued and outstanding common shares of Connecticut Water at a price of $70 per common share. The 33 premium is relative to Connecticut Water’s closing share price of $52.57 on March 14 and exceeds Connecticut Water’s all-time high price of $69.72 per common share.

Photo Credit: CT Water