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(Sharecast News) - US utility companies American Water Works and Essential Utilities announced on Monday that they are to merge in an all-stock deal with a combined market value of nearly $40bn.
The combined company, which will serve 4.7m water and wastewater connections across 17 US states, will boast an enterprise value of around $63bn, the firms said.
The new company will be 69%-owned by shareholders of American Water, the larger business with a market cap of $27.6bn, and 31%-owned by Essential, valued at $11.6bn.
Essential shareholders are set to receive 0.305 American Water shares for each Essential share they own - equivalent to a premium of around 10% based on the average stock price over the past 60 trading days.
"This combination brings together two industry leaders united by our shared mission to provide safe, clean, reliable and affordable water and wastewater services to our customers," said American Water's president and chief executive John Griffith.
"By joining forces with Essential, the combined company's enhanced scale and operational efficiency will support continued investment in our critical infrastructure, enabling us to continue providing superior customer service at affordable rates."
American Water said that, when the transaction closes, it will conduct a review of "strategic alternatives" for its non-water and non-wastewater businesses.
Essential shares were up around 2% in pre-market trade, while American Water was slightly lower.
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