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American Water Works Company, Inc. (AWK - Snapshot Report) continues with the systematic inorganic growth strategy to expand its existing operations. The company announced that its unit California American Water has signed an agreement to acquire the operating assets of Dunnigan Water Works. Per the agreement, the company will take over the water and wastewater facilities from Dunnigan Water Works.

Dunnigan Water Works is an investor-owned Class D water utility company. The company provides services with its 253 water and wastewater connections to the customers in Yolo County, Calif.

Currently, California American Water provides water services to approximately 60,000 homes and businesses in Sacramento and Placer counties. The aforesaid acquisition will enable the company to enhance its customer base marginally. Inclusion of Dunnigan Water Works’ assets will help the company to reap benefits from its existing operations in the region and reduce competition.

American Water Works’ acquisition strategy involves buying up assets having the similar line of business, which are immediately accretive. We note that the recent acquisition marks the company’s fourth acquisition in the final quarter of 2013. American Water Works’ acquisitions in the past have helped the company to strengthen and expand its core offerings.

On Dec 16, 2013, American Water Works’ subsidiary Tennessee American Water and the City of Whitwell announced that they had acquired the water system assets from the city of Whitwell in southeast for roughly $1.5 million. The acquisitions will enable both the entities to add approximately 2,800 new customers to their portfolio.

American Water Works’ constant effort towards strategic acquisitions while upgrading the existing infrastructure will enable the company to deliver continuous services to its customers and strengthen system competence. These initiatives will help the company to improve reliability and public safety, while maintaining government legislations.

American Water Works currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the water utility industry include American States Water Company (AWR - Snapshot Report), Connecticut Water Service, Inc. (CTWS - Snapshot Report) and California Water Service Group (CWT - Snapshot Report), each with a Zacks Rank #2 (Buy).

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