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Eversource slams Connecticut Water's solicitation of alternative M&A proposals

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Eversource slams Connecticut Water's solicitation of alternative M&A proposals

Eversource Energy heavily criticized the amendment to the proposed merger of water utilities Connecticut Water Service Inc. and SJW Group allowing for the solicitation of alternative proposals.

The amendment, announced May 31, includes a "go-shop" provision permitting Connecticut Water to actively solicit third-party proposals for an alternative merger, acquisition or other strategic transaction.

"Eversource believes that the go-shop process has been designed to create the illusion that Connecticut Water's board is finally fulfilling its fiduciary duties without it actually doing so," the company said in a June 5 statement.

Connecticut Water's board had previously rebuffed an offer by Eversource Energy to acquire all of its outstanding shares at $63.50 per share in cash or Eversource common shares. Under the SJW Group/Connecticut Water "merger of equals," Connecticut Water shareholders would receive 1.1375 shares of SJW Group common stock for each share of Connecticut Water. SJW Group is headquartered in San Jose, Calif.

Eversource, which has expressed interest in Connecticut Water because it previously acquired a Connecticut water utility, Aquarion Water Co., said it will not participate in the "severely limited go-shop process" because Connecticut Water failed to provide access to due diligence information that is not already publicly available and access to the company's senior management.

In a statement June 6 responding to Eversource, Connecticut Water said: "We reiterate our invitation for Eversource to participate in the fair and open go-shop process that has been initiated by Connecticut Water and cease its pattern of seriously false statements that seem designed to interfere unfairly with the ability of Connecticut Water shareholders to receive the best possible transaction."

Among the issues it raised, Eversource criticized Connecticut Water and SJW's refusal to terminate or lower the $28.1 million break-up fee, their extension of the tail period applicable to the break-up fee from 12 to 15 months, and SJW's additional rights to match competing proposals.

"If Connecticut Water and San Jose Water were to eliminate the break-up fee and Eversource's superior proposal was accepted by Connecticut Water, cash savings of up to $2.25 per share would be available for Eversource to consider increasing its $63.50 per share offer to Connecticut Water shareholders," Eversource said.

Connecticut Water, which said its financial adviser, Wells Fargo Securities LLC, has already begun soliciting indications of interest from third parties, said the termination fee payable to SJW Group was established in the companies' previously announced merger agreement "and is not a barrier to any party participating in this process."