American Water, Essential Utilities to combine in all-stock merger

American Water Works Company (AWK) and Essential Utilities (WTRG) announced that each company’s board of directors has unanimously approved a definitive agreement to combine in an all-stock, tax-free merger as a leading regulated U.S. water and wastewater public utility with a pro forma market capitalization of approximately $40B and a combined enterprise value of approximately $63B, based on closing stock prices as of October 24, 2025. Under the terms of the agreement, Essential shareholders will receive 0.305 shares of American Water for each share of Essential they own at the closing of the transaction. This exchange ratio implies a premium of approximately 10% to Essential shareholders based on the average of the daily volume weighted average price of each company’s common stock over the 60-trading-day period ending October 24, 2025. Upon completion of the merger, American Water shareholders will own approximately 69% and Essential shareholders will own approximately 31% of the combined company on a fully diluted basis. Upon closing of the transaction, American Water plans to conduct a review of strategic alternatives for its non-water and non-wastewater businesses. No assurance can be given that any transaction or other strategic outcomes would result from the review. The transaction is expected to close by the end of the first quarter of 2027, subject to customary closing conditions, including, among others, approval from each company’s shareholders, clearance under the Hart-Scott-Rodino Act, and regulatory approvals, including approval from the applicable public utility commissions.