American Water Works, Essential Utilities to Combine to Create $40 Billion Utility

Core Viewpoint - American Water Works and Essential Utilities have agreed to merge in an all-stock deal valued at approximately $63 billion, creating a combined water-and-wastewater utility company with a market capitalization of about $40 billion [1][4]. Group 1: Merger Details - The combined entity will operate under the name American Water and aims to enhance scale and efficiency, supporting investment in critical infrastructures and expansion [2]. - Upon completion, American Water shareholders will own about 69% of the combined company, while Essential shareholders will own approximately 31% [4]. - Essential Utilities shareholders will receive 0.305 shares of American Water for each share they own, representing a roughly 10% premium based on a 60-trading-day average price [6]. Group 2: Leadership and Structure - John Griffith will serve as the Chief Executive of the combined company, while Christopher Franklin from Essential will take the role of executive vice chair of the board [7]. - The board will consist of 15 members, including 10 directors from American Water and 5 designated by Essential [8]. Group 3: Financial Outlook - The merger is expected to be additive to American Water's per-share earnings in the first year post-close, with the combined company maintaining a 7% to 9% earnings-per-share and dividend growth target [5]. - The combined company will have an enterprise value of approximately $63 billion, enhancing resilience to market changes and operational leverage due to its larger footprint and geographic diversity [4]. Group 4: Timeline and Location - The deal is anticipated to close by the end of the first quarter of 2027 [8]. - The headquarters will be located in Camden, N.J., with a presence maintained at Essential's offices in Bryn Mawr, Pa., and Pittsburgh [8].