NEW YORK (Reuters) - SJW Group (SJW.N) and Connecticut Water Service Inc (CTWS.O) said on Monday they were changing from a merger to an acquisition agreement, with SJW offering to buy the New England utility for $1.1 billion in cash instead of combining stock.
The switch to an all-cash offer is worth $70 per Connecticut Water share, a 33 percent premium to Connecticut Water’s share price prior to the original deal announced in March, according to a joint statement.
It was also higher than the implied $61.86 per share value of the Clinton, Connecticut-based firm under the merger-of-equals transaction, which would have created a combined company in which existing SJW shareholders would hold 60 percent of the stock.
SJW closed 2.3 percent lower, while Connecticut Water was 9 percent higher at $68.50.
To pay for the acquisition, SJW will initially utilize a $975 million bridge loan from financial adviser JP Morgan Chase (JPM.N). Ultimately, the purchase would be covered by debt and between $450 million and $500 million of equity finance.
The new deal aims to conclude in the first quarter of 2019, subject to approvals from Connecticut Water’s shareholders, as well as regulators in Connecticut and Maine.
“We have converted from a stock-for-stock deal to a cash offer, which will resolve any further market distractions from the inferior proposals,” SJW Chief Executive Eric Thornburg told Reuters, in reference to the actions by Eversource and CalWater.
Switching to an acquisition, versus a merger structure, means that SJW shareholders will no longer be required to vote on approving the deal, the statement said.
CalWater has an open tender offer to acquire SJW that runs until Sept. 28.
However, asked if the change was aimed at heading off any shareholder challenge to the deal, Thornburg told Reuters it “wasn’t a consideration” and it had received nothing but support from its shareholders.
CalWater declined to comment. A spokesman for Eversource said the company was evaluating developments but, as it has made clear, it will be disciplined in pursuing this or any other transaction.
Reporting by David French in New York; Additional Reporting by Liana B. Baker; Editing by Lisa Shumaker