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Spurned suitors continue their pursuits of SJW Group, Connecticut Water

As water utilities SJW Group and Connecticut Water Service Inc. move ahead with a proposed merger by revising their terms, each company continues to be chased by another interested but unwanted bidder.

San Jose, Calif.-headquartered SJW on Aug. 13 received an updated offer from California Water Service Group, also headquartered in San Jose, pitching a new $70 per share cash bid in an effort to engage the SJW board of directors. In April, California Water offered $68.25 per share for SJW and said its revised offer represents a 33.6% premium to SJW's closing share price on the final trading day prior to the initial proposal.

In the new proposal, California Water said is willing to consider different transaction structures that achieve tax deferral on gains from the sale of SJW shares for its stockholders with a historical low tax basis and who may prefer to own stock of the combined company.

California Water will also consider other features such as a ticking fee for any delay in regulatory reviews, and the addition of SJW officials to the combined company's board and top management. California Water also proposed a 45-day go-shop period.

However, California Water said the proposal does not amend or otherwise modify its earlier tender offer to acquire all outstanding SJW shares.

Meanwhile, Connecticut-headquartered multiutility Eversource Energy on Aug. 13 reaffirmed its commitment to acquire Connecticut Water Service for $64 per share in cash or Eversource shares. Eversource said that if the SJW/Connecticut Water proposal is terminated with Connecticut Water owing no break fee, it would increase its offer to $66 per share.

Other features of the Eversource proposal are a base-rate freeze for Connecticut Water customers through 2022, the doubling of Connecticut Water's charitable contributions to the communities it serves, and the retention of key executives and employees, while being accretive to Eversource's earnings per share in the first full year post-closing.

Eversource has been granted intervenor status in the SJW/Connecticut Water proposal by the Connecticut Public Utilities Regulatory Authority and the Maine Public Utilities Commission. Connecticut Water has already turned down offers from Eversource twice.

The revised SJW/Connecticut Water deal, which replaced an earlier stock-swap transaction, is valued at $1.1 billion, and if approved is expected to be accretive to SJW's earnings in 2019.

Under the plan of merger, SJW will acquire Connecticut Water and add two of its directors to the combined enterprise's board. The new company will be headquartered in San Jose and SJW President and CEO Eric Thornburg will serve as chairman, president and CEO of the new entity, while David Benoit, the current president and CEO of Connecticut Water, will become president of the successor company's New England Region.