American Water Works Company, Inc. and Essential Utilities, Inc. have reached an agreement to merge in an all-stock, tax-free deal that will form one of the largest regulated water and wastewater utility companies in the United States. The new entity is projected to have a value of approximately $63 billion, with a market capitalization of around $40 billion, based on stock prices from October 24.
According to the merger agreement, shareholders of Essential will receive 0.305 shares of American Water for each share they own, which equates to a 10% premium based on the average stock prices over the past 60 days. Upon completion of the merger, American Water shareholders will control about 69% of the new company, while Essential shareholders will possess 31%.
This merger unites two significant regulated utilities in the nation, collectively serving nearly 4.7 million water and wastewater connections across 17 states and 18 military bases. Additionally, the merged company will include Peoples Natural Gas, which serves roughly 746,000 customers in Pennsylvania and Kentucky.
American Water has indicated that it will explore strategic options for its non-water and wastewater operations after the merger is finalized. The companies believe this merger will facilitate ongoing investments in infrastructure, enhance water quality, and advance technology, all while keeping customer rates affordable.
American Water anticipates maintaining its long-term rate base growth target of 8–9% and aims for earnings-per-share and dividend growth targets of 7–9% post-merger. John C. Griffith, President and CEO of American Water, will head the combined company, while Christopher H. Franklin, CEO of Essential, will assume the role of Executive Vice Chair of the board. The headquarters for the new company will be in Camden, New Jersey, operating under the American Water name, with Essential’s offices in Bryn Mawr and Pittsburgh continuing to play operational roles.
The transaction is contingent upon approvals from shareholders and regulatory bodies, including a review under the Hart-Scott-Rodino Act and by state utility commissions. The closing is anticipated by the end of the first quarter of 2027.
Source: American Water
