NEW YORK (Reuters) - California Water Service Group (CWT.N) ended its pursuit of SJW Group (SJW.N) on Friday, clearing the way for SJW’s chief executive to move ahead with the $1.1 billion acquisition of a Connecticut-based water utility that he ran until last year.
CalWater had announced late on Monday a revised offer to acquire San Jose-based SJW for $70 per share in cash, valuing it at around $1.45 billion, after a lower bid was rejected in April.
SJW CEO Eric Thornburg told Reuters the offer from CalWater did not give the company and its shareholders the same kind of benefits that its deal with Connecticut Water Service Inc (CTWS.O) would provide.
“The board, after careful review with our advisers and management, decided to stay the course with Connecticut Water, as we believe in the power of the deal which we have,” said Thornburg, who joined SJW in November after a decade as CEO of Connecticut Water.
CalWater later said in a statement it would withdraw both its revised bid and a separate tender offer for SJW shares, which it launched in June.
“CalWater is financially disciplined, and after repeated attempts to engage with the SJW board of directors, we believe it is in our stockholders’ best interests to withdraw our proposal and focus on other opportunities,” said Martin Kropelnicki, president and CEO of CalWater.
Following CalWater’s statement, SJW shares fell to trade 4.5 percent lower at $63.70. Having slipped earlier in the day, CalWater’s stock was 0.7 percent higher at $40.95.
Friday’s moves were the latest twists in a four-way water utility merger saga that began in March when SJW and Connecticut Water announced they would combine to create the third-largest investor-owned water and wastewater utility in the United States.
The proposed deal brought out local suitors for both businesses - CalWater for SJW and Boston-based Eversource Energy (ES.N) for Connecticut Water. The would-be buyers argued regional consolidation was better than a trans-America deal.
Water utilities, particularly in California, which has experienced severe drought conditions in recent years, often see mergers and acquisitions as a way to increase scale and efficiency.
SJW and Connecticut Water announced on Aug. 6 they had amended their planned combination into a $1.1 billion acquisition by SJW.
“We’re very enthusiastic on our future prospects, especially with the current deal in place which gives us significant accretion by 2021,” said Thornburg.
Reporting by David French; editing by Steve Orlofsky and Tom Brown