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Moss Family Pledge Their 31% of SJW Shares for Revised Connecticut Water Service Deal
Thursday 09 August 2018

9 August 2018 - Members of the Moss family, stockholders who in aggregate own more than 31% of California, US-based water utility operator SJW Group's (NYSE: SJW) outstanding shares, have expressed support for the combination with Connecticut Water Service, Inc. (NASDAQ: CTWS) under revised terms announced on 6 August, SJW said.

The revised transaction, which is expected to close in 1Q19, is subject to customary closing conditions and approvals, including the approval of Connecticut Water shareholders, the approvals of the Connecticut Public Utilities Regulatory Authority and the Maine Public Utilities Commission and the approval of the Federal Communications Commission.

SJW said the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act was terminated early on April 27, 2018. The California Public Utilities Commission previously instituted an investigation into whether the transaction is subject to its approval and anticipated impacts in California.

The CPUC is planning to complete its inquiry in time to allow the acquisition to go forward, if appropriate, by the end of 2018. It is anticipated that consideration of the revised transaction will not substantially extend the current CPUC investigation.

In March, the companies agreed to a merger to create a US investor-owned water and wastewater utility valued at USD 750m.

The August amended agreement calls for Connecticut Water Service to pay USD 70 per share in cash. This deal is worth USD 1.1bn and has an equity purchase price of USD 843m.

Connecticut Water has a right under the amended merger agreement to review and negotiate any alternative proposals received from third parties until 14 July 2018.

In connection with the solicitation process, Connecticut Water and its financial advisors will begin soliciting third party indications of interest.

Eversource Energy (NYSE: ES) will be among those invited to participate, however, Connecticut Water reaffirmed that the board does not believe that Eversource's current USD 63.50 per share proposal is a superior proposal to the SJW Group merger agreement.

Moreover, the Connecticut Water Board has unanimously determined that it would not agree to a transaction with Eversource on the terms currently proposed, regardless of the outcome of the proposed SJW Group merger, because the Connecticut Water Board believes that the current Eversource proposal substantially undervalues Connecticut Water.

At this time, Connecticut Water remains subject to the SJW Group merger agreement, and the Connecticut Water Board has not changed its recommendation in favor of the merger of equals with SJW Group.

Under the terms of the current 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 USD 61.86 per share, or about USD 750m in the aggregate.

Following closing of the transaction, SJW Group shareholders will own approximately 60% of the combined company, and Connecticut Water shareholders will own approximately 40%, on a fully diluted basis. Based on each company's closing share price, the combined company would have a pro forma USD 1.9bn equity value and a USD 2.6bn enterprise value.

SJW Group said the increased scale and diverse geographic footprint of the new organisation 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 USD 496m and recurring net income of USD 74m based on a 2017 pro forma basis.

SJW Group is the parent company of San Jose Water, SJWTX, Inc., and SJW Land Company.

Together, San Jose Water and SJWTX, Inc. provide water service to more than 1m people in San Jose, California and nearby communities and in Canyon Lake, Texas and the nearby communities. SJW Land Company owns and operates commercial real estate investments.

CTWS is the parent company of The Connecticut Water Company, The Maine Water Company, The Avon Water Company, and The Heritage Village Water Company. Together, these subsidiaries provide water service to more than 450,000 people in Connecticut and Maine, and wastewater service to more than 10,000 people in Connecticut.

J.P. Morgan Securities LLC is serving as financial advisor to SJW Group, and Skadden, Arps, Slate, Meagher and Flom LLP is legal counsel. Wells Fargo Securities, LLC is serving as financial advisor to Connecticut Water, and Sullivan and Cromwell LLP is legal counsel.
Details
Date Published: 09/08/2018
Target: Connecticut Water Service
Country: USA
Deal Size: 843m (USD)
Sector: Utilities
Type: Merger
Financing: Stock
Status: Agreed
Vendor:
Buyer: SJW Group
Buyer Advisor: J.P. Morgan Securities , Skadden, Arps, Slate, Meagher and Flom
Comment:
SJW Group shareholders will own approximately 60% of the combined company, and Connecticut Water shareholders will own approximately 40%

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