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Eversource Reaffirms Offer to Acquire Connecticut Water

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Eversource Energy (ES - Free Report) has reaffirmed its original offer to acquire Connecticut Water Service, Inc. at $63.50 per share in cash or Eversource shares. Eversource’s earlier offer was rejected by management of Connecticut Water Service, citing that it was inferior to the offer made by SJW Group (SJW - Free Report) . (Read more: :Connecticut Water Loyal to SJW Group, Rejects Eversource Bid)

Development Post Rejection

Since the rejection of the Eversource offer, the merger agreement between Connecticut Water Service and SJW Group has been amended. This amendment includes a new go-shop provision that will allow Connecticut Water Service to explore offers of an alternative merger, acquisition or other strategic transaction.

Per the amendment, Connecticut Water Service is permitted to review and negotiate any alternative proposals received from third parties until 11:59 p.m. Eastern time on Jul 14, 2018. (Read more: Connecticut Water Amends Merger Covenant, Open to New Offer)

Fresh Opportunity for Eversource
 

Amendment in the merger agreement provided a fresh opportunity to Eversource Energy. Eversource utilized the same by affirming its bid to acquire Connecticut Water Service. Connecticut Water Service’s closing share price on Jun 13, 2018 was $64.59, higher than Eversource’s offer of $63.50, making the offer unimpressive. It is quite unlikely that Connecticut Water Service’s shareholders or management of the company will agree to the offer made by Eversource Energy.

Eversource Energy is banking on termination of the agreement between Connecticut Water Service and SJW Group, which will result in extra savings for Connecticut Water Service, making the offer attractive.

The only advantage Eversource Energy has over others is that its existing water operations are in close proximity of Connecticut Water Service’s existing service territories. The acquisition of Connecticut Water would have further expanded its service territories and operations in the Northeast and provided superior services to customers.

Merger and Acquisition in the Water Space

The final outcome is still unclear and it is yet to know which company will have the last laugh on Connecticut Water Service’ acquisition deal. As the story unfolds, one can notice that the water utility industry offers excellent growth opportunities, resulting in rising interest in this space, shown by companies that were earlier focused primarily on other businesses.

American Water Works Company (AWK - Free Report) is very active in making acquisitions and expanding its market reach through the same.The company could be a potential candidate to make an offer to acquire Connecticut Water Service. The acquisition of Connecticut Water Service could further expand the existing operation of the company in the Northeast states.

Price Movement & Zacks Rank

Eversource Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


In a year’s time, shares of Eversource have lost 14.7%, wider than its industry’s decline of 9.7%.



 

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