American Water Works Company, Inc. and Essential Utilities, Inc. have reached a significant agreement to merge in an all-stock transaction. This merger aims to create a substantial presence in the U.S. water and wastewater sector, boasting a pro forma market capitalization of about $40 billion and an enterprise value of approximately $63 billion, as per stock prices dated October 24, 2025.
Overview of the Merger
The merger has been unanimously approved by the boards of directors of both companies. John C. Griffith, President and CEO of American Water, expressed that this partnership will enhance operational efficiency and infrastructure investment. Griffith emphasized the commitment to providing affordable and reliable water services.
Leadership Perspectives
Christopher H. Franklin, Chairman and CEO of Essential Utilities, highlighted the 140-year legacy of Essential in providing sustainable and innovative services. He believes the merger will further strengthen their capability to adapt to evolving water and wastewater challenges.
Shareholder Benefits
- The merger agreement stipulates that Essential shareholders will receive 0.305 shares of American Water for each share owned.
- This signifies a roughly 10% premium based on stock averages calculated over a 60-day trading window, concluding on October 24, 2025.
- Post-merger, American Water shareholders are expected to hold around 69% ownership of the new entity, while Essential shareholders will own about 31%.
Long-Term Growth and Operations
The combined company anticipates maintaining a long-term rate base growth target between 8% to 9%. This targets continued investment in critical infrastructure, ensuring superior customer service.
Commitments to Stakeholders
- The merger aims to enhance water affordability and community engagement across the combined operational regions.
- There will be no immediate changes to customer rates, promoting economic stability in the over 2,000 communities served by the new entity.
- Employee compensation and benefits are expected to remain stable, preserving the commitments made to existing union partnerships.
Future Prospects
With a combined water and wastewater rate base estimated at around $29.3 billion by the end of 2024, the new company will serve approximately 4.7 million connections across 17 states. This larger operational footprint is proposed to enhance service delivery and operational leverage.
Leadership Structure
Upon the merger’s completion, Griffith will continue as CEO while Franklin will take on the role of Executive Vice Chair. The board will consist of ten directors from American Water and five from Essential, ensuring diverse leadership.
Timeline and Future Steps
The merger is anticipated to finalize by the end of the first quarter of 2027, contingent on various approvals, including shareholder and regulatory consents.
Advisors and Strategic Partnership
For this merger, American Water has enlisted BofA Securities as its financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP for legal guidance. Essential has similarly appointed Moelis & Company LLC and Gibson, Dunn & Crutcher LLP as their financial and legal advisors, respectively.
This merger between American Water and Essential Utilities is poised to become a transformational force in the U.S. water and wastewater industry, consolidating expertise and resources to enhance service reliability and infrastructure resilience across a broader customer base.
