American Water and Essential Utilities to Merge

Deal Analysis

American Water and Essential Utilities have announced a definitive agreement to merge in an all-stock, tax-free transaction. This merger will create a dominant player in the U.S. regulated water and wastewater utility sector, boasting a pro forma market capitalization of approximately $40 billion and a combined enterprise value of approximately $63 billion. The combined entity will likely benefit from increased scale, operational efficiencies, and a stronger financial profile, potentially leading to enhanced investment opportunities and improved service delivery to customers. The merger represents a significant consolidation within the utilities sector. Essential Utilities, formerly Aqua America, brings its expertise in serving approximately 3 million people to the table. The deal underscores the ongoing trend of consolidation within the water and wastewater industry, driven by the need for infrastructure investment, regulatory compliance, and economies of scale. The successful completion of this merger would establish a clear market leader and potentially influence future M&A activity in the sector.

All-stock, tax-free merger between American Water and Essential Utilities.
Creates a pro forma market capitalization of approximately $40 billion and a combined enterprise value of approximately $63 billion.
Establishes a leading regulated U.S. water and wastewater public utility.
Essential Utilities, formerly Aqua America, brings a substantial customer base to the combined entity.

Market Context: The U.S. water and wastewater utility sector is characterized by aging infrastructure, increasing regulatory requirements, and a fragmented market. This environment often drives consolidation as companies seek to achieve economies of scale and improve operational efficiency.

Source Intelligence

KEY DETAILS

Essential shareholders will receive 0.305 shares of American Water for each share of Essential they own at the closing of the transaction. Quote: Under the terms of the agreement, Essential shareholders will receive 0.305 shares of American Water for each share of Essential they own at the closing of the transaction. American Water shareholders will own approximately 69% and Essential shareholders will own approximately 31% of the combined company on a fully diluted basis. Quote: Upon completion of the merger, American Water shareholders will own approximately 69% and Essential shareholders will own approximately 31% of the combined company on a fully diluted basis. The combined company would have a water and wastewater rate base of approximately $29.3 billion as of the end of 2024, with approximately 4.7 million water/wastewater connections across 17 states and on 18 military installations. Quote: The combined company would have a water and wastewater rate base of approximately $29.3 billion 1 as of the end of 2024, with approximately 4.7 million water/wastewater connections across 17 states and on 18 military installations.

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Deal Size

a pro forma market capitalization of approximately $40 billion

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Location

CAMDEN, N.J. & BRYN MAWR, Pa.

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Financials

a combined enterprise value of approximately $63 billion

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Announcement

October 27, 2025

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Expected Close

The transaction is expected to close by the end of the first quarter of 2027

PARTIES MENTIONED IN SOURCE

A

American Water Works Company, Inc. buyer

"American Water Works Company, Inc. (NYSE: AWK) (“American Water”) and Essential Utilities, Inc. (NYSE: WTRG) (“Essential”) today announced that each company’s board of directors has unanimously approved a definitive agreement to combine in an all-stock, tax-free merger"

E

Essential Utilities, Inc. seller

"American Water Works Company, Inc. (NYSE: AWK) (“American Water”) and Essential Utilities, Inc. (NYSE: WTRG) (“Essential”) today announced that each company’s board of directors has unanimously approved a definitive agreement to combine in an all-stock, tax-free merger"

B

BofA Securities advisor

"BofA Securities is serving as exclusive financial advisor to American Water"

S

Skadden, Arps, Slate, Meagher & Flom LLP advisor

"Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor"

M

Moelis & Company LLC advisor

"Moelis & Company LLC is serving as exclusive financial advisor to Essential"

G

Gibson, Dunn & Crutcher LLP advisor

"Gibson, Dunn & Crutcher LLP is serving as legal advisor"