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April 26, 2018

Calif. utility fans bidding war in second pitch to upend CT Water merger

Connecticut Water Co.'s Chester Reservoir.

There is a bicoastal water war brewing in the United States and Connecticut is in the middle of it.

California Water Service Group of San Jose confirmed Thursday it made an offer to acquire California-based SJW Group, which recently announced it reached a deal to purchase Connecticut Water Service for about $750 million.

SJW’s board, however, recently rejected California Water’s April 4 offer, the company said.

Meanwhile, Eversource Energy last week said it made an unsolicited bid to purchase Connecticut Water on April 5, weeks after SJW Group reached its mega deal with the Clinton-based water utility. That puts all four companies in a heated competition to purchase major water assets in California and Connecticut.

California Water confirmed Thursday it offered $68.25 a share, or approximately $1.9 billion, to purchase SJW Group.

Martin A. Kropelnicki, California Water’s president and CEO, said in a release that his company has “repeatedly sought to discuss privately our superior proposal with SJW’s board,” which refused to engage in negotiations and responded Wednesday night that its board rejected the offer on April 13.

“Their lack of engagement has prevented their stockholders from learning about the substantial and immediate value we can deliver,” Kropelnicki said. “We are now making our proposal public so stockholders can evaluate it for themselves. We are confident they will view it as clearly superior to the Connecticut Water transaction and to SJW’s standalone prospects.”

California Water said its proposal provides superior value than SJW’s merger agreement with Connecticut Water, which is valued at about $750 million, or $61.86 per share. The value of the deal since then has gone up to $63.70 per share.

By joining forces, California Water says the two would create the nation’s third largest water utility, serving more than 3 million people in California, Washington, New Mexico, Hawaii and Texas.

SJW and its subsidiaries include San Jose Water, which serves over 1 million people around San Jose, Calif., and Texas.

California Water, meanwhile, is the third-largest publicly traded water utility in the country, operating in California, Washington, New Mexico and Hawaii, its website says.

In statements released Thursday, SJW and Connecticut Water each reaffirmed their commitment to the "merger of equals."

"The SJW Group board continues to be committed to its existing merger agreement with Connecticut Water, which remains on track to close during the fourth quarter of 2018," SJW said.

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