LONDON, UK / ACCESSWIRE / March 19, 2018 / Active-Investors.com has just released a free research report on SJW Group (NYSE: SJW). If you want access to this report all you need to do is sign up now by clicking the following link www.active-investors.com/registration-sg/'symbol=SJW as the Company's latest news hit the wire. On March 15, 2018, the Company and Connecticut Water Service Inc. (NASDAQ: CTWS) declared that their Boards of Directors have unanimously approved a definitive agreement to combine through a merger of equals. The merger of these two Companies will create the 3rd largest investor-owned water and wastewater utility in the United States, based on pro-forma enterprise value and combined rate base. Register today and get access to over 1000 Free Research Reports by joining our site below:
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Active-Investors.com is focused on giving you timely information and the inside line on companies that matter to you. This morning, SJW Group and Connecticut Water Service most recent news is on our radar and our team decided to put out a fantastic report on the company that is now available for free below:
www.active-investors.com/registration-sg/'symbol=SJW
www.active-investors.com/registration-sg/'symbol=CTWS
Merger to Create Third Largest Water Utility Company
The combined entity is expected to have a strong multi-state presence with high-quality and well-run operations, and constructive regulatory relationships in California, Connecticut, Maine, and Texas. The new Company will serve over 1.5 million people through more than 700 employees.
The combination of SJW Group and Connecticut Water Service would create a new, larger, and stronger organization, capable of delivering greater value and benefits for shareholders, customers, employees, and communities, than either Company could deliver on its own. The enhanced market presence, increased sale, and widespread geographic footprint of the new entity would provide numerous opportunities for investments in service and reliability. The combined Company is expected to generate operating revenues of $496 million and a recurring net income of $74 million, based on a 2017 pro-forma basis.
Financial Considerations of the Agreement
The agreement entitles Connecticut Water Service's shareholders to receive 1.1375 shares of SJW Group common stock for each share of Connecticut Water Service common stock, which is equivalent to $61.86 per share, or a total of $750 million, based on SJW Group's closing stock price as on March 14, 2018, and the agreed exchange ratio. Post-closing, SJW Group's shareholders will own around 60% of the combined entity, while Connecticut Water Service's shareholders will own the remaining 40%, on a fully diluted basis. Considering both Companies' closing share price as on March 14, 2018, and the transaction exchange ratio of 1.1375x, the combined Company would have a pro-forma $1.9 billion equity value and a $2.6 billion enterprise value.
Strategic Rationale
- Attractive earnings accretion for both Companies - The merger is expected to be accretive to each Company's standalone earnings per share (EPS) in the first fiscal year after closing. Moreover, accretion in EPS is expected to increase to mid- to high-single digit in the next few years.
- Strong balance sheet and enhanced financial flexibility - The combined Company, with total assets of $2.4 billion, will gain from a stronger financial foundation and an increased access to capital markets. This would allow the new organization to capitalize on growth opportunities on a national level.
- Resilient credit profile - The combined Company would have an incremental debt capacity, which would support its extensive share repurchase program. The combined Company expects to maintain a strong "A' credit profile, and pursue a share repurchase program of up to $100 million, subject to the closing of the transaction, market conditions, and Board's approval.
- A stable and growing dividend - The combined Company is expected to establish a dividend equivalent to SJW Group's announced 2018 annual dividend of $1.12 per share. This implies a dividend increment of 7% for Connecticut Water Service's shareholders, after adjusting for the agreed exchange ratio, based on the annualized quarterly cash dividend of $0.2975 per share declared by Connecticut Water Service on November 09, 2017.
Combined Company Headquarters
Post the merger, all utility and operating subsidiaries will continue operating under their existing local leadership and brand names, i.e. San Jose Water, SJWTX Inc., SJW Land Co., Connecticut Water Co., Maine Water Co., Avon Water Co., and Heritage Village Water Co.
The headquarters for the new Company will be in San Jose, California, with the New England headquarters located in Clinton, Connecticut.
Combined Company Leadership
- An efficient Board of Directors and experienced leadership team, that leverage the strengths and capabilities of all subsidiaries, will lead the new combined Company. The Board of Directors of the new entity would comprise of 12 Directors, with 7 Directors appointed by SJW Group and 5 Directors, including the Lead Independent Director, appointed by Connecticut Water Service.
- Eric W. Thornburg will serve as the Chairman, President, and Chief Executive Officer (CEO) of the newly-merged Company; while David C. Benoit will serve as the President, New England Region, overseeing the New England operations, including Connecticut Water.
- James Lynch will serve as the Chief Financial Officer (CFO) of the new Company, while Kristen Johnson will serve as the Chief Human Resource Officer.
Transaction Closing
At present, the transaction is subject to customary closing conditions and approvals, such as the approval of the issuance of shares in the transaction by SJW Group's stockholders, the approval of Connecticut Water Service's shareholders, the approvals of the Connecticut Public Utilities Regulatory Authority, and the Maine Public Utilities Commission, the approval of the Federal Communications Commission, and the expiration or termination of the waiting period under the HartScott-Rodino Antitrust Improvements Act. However, the transaction is not subject to any financing conditions.
Post achieving these approvals, the merger transaction is expected to close by the end of 2018.
For the purpose of this transaction, J.P. Morgan Securities LLC is serving as the financial advisor to SJW Group, while Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal counsel. On the other hand, Wells Fargo Securities LLC is serving as the financial advisor to Connecticut Water Service, and Sullivan & Cromwell LLP is serving as its legal counsel.
Stock Performance Snapshot
March 16, 2018 - At Friday's closing bell, SJW Group's stock climbed 3.45%, ending the trading session at $53.96.
Volume traded for the day: 314.16 thousand shares, which was above the 3-month average volume of 76.31 thousand shares.
Stock performance in the last month - up 2.10%; and past twelve-month period - up 13.94%
After last Friday's close, SJW Group's market cap was at $1.07 billion.
Price to Earnings (P/E) ratio was at 19.64.
The stock has a dividend yield of 2.08%.
The stock is part of the Utilities sector, categorized under the Water Utilities industry. This sector was up 0.8% at the end of the session.
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