March 15, 2018

CT Water to merge with Calif. water utility

Contributed photo
Contributed photo
SJW Group CEO Eric Thornburg was previously CEO of Connecticut Water Service, resigning last September.

Connecticut Water Service and a California water utility agreed Thursday to merge in a $750 million deal they say will create the nation's third-largest water utility.

SJW Group of San Jose, Calif., and Clinton-based Connecticut Water Service called their proposed combination "a merger of equals." Under terms of the deal, Connecticut Water shareholders will receive 1.1375 shares of SJW Group stock for each share, which translates to approximately $61.86 per share.

The two said the merger would drive benefits for both shareholders and customers.

In an interesting twist, SJW Group President and CEO Eric W. Thornburg was previously CEO of Connecticut Water, resigning last September. He would remain the leader of the combined company, while his Connecticut Water successor, David Benoit, will be president of the company's New England region.

The merger began taking shape soon after Thornburg left for California, he said.

In an interview Thursday, Thornburg said he contacted Benoit given the companies' strong relationship in the past, and for the possible benefits of bringing two "strong" regional companies to the national stage. He would not elaborate on the timeline of the negotiations, but added the merger came together "quickly."

"The combination is very powerful and provides benefits to all of our stakeholders, communities and employees," Thornburg said.

After leading both companies, Thornburg said he is confident they have a "strong culture fit" to drive future growth.

"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," Thornburg said. "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."

The company headquarters will remain in California and SJW shareholders will own about 60 percent of the combined companies.

Combined, they will serve more than 1.5 million customers, including more than 450,000 in Connecticut, and have over 700 employees.

Connecticut Water, New England's largest publicly traded water utility company, employs almost 300 full-time employees between Connecticut and Maine, and approximately 210 in its home state, Benoit said.

He said there will be no merger-related layoffs, adding that local leaders will remain in place.

The deal, which is expected to close before the end of 2018, is subject to the approval of Connecticut Water stockholders, the Connecticut Public Utilities Regulatory Authority, the Federal Communications Commission and antitrust review by the U.S. Justice Department.

Benoit said the group is confident the transaction will be approved.

"We think it's a great story to tell and that it will be well received among the folks who will need to approve it," he said.

CT Water 2017 profits rise

Also on Thursday, Connecticut Water announced a spike in its 2017 net earnings of $25.1 million, or $2.17 per share, on total revenues of $113.8 million from its water operations, service and rentals, and real estate segments.

By comparison, the company reported net income of $23.4 million, or $2.12 per share, on total revenues of $105.3 million in 2016.

Officials said the revenue increase was due to acquisitions of the Heritage Village Water Company and the Avon Water Company, both acquired in 2017.

"CTWS delivered on its long-term growth strategy of prudent acquisitions and infrastructure investment in 2017," Benoit said. "CTWS grew the number of customers it serves by 10 percent through acquisitions in 2017, and entered the publicly regulated wastewater space."

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