American Water Works Company, Inc. (AWK) and Essential Utilities, Inc. (WTRG) on Monday said they have agreed to merge in an all-stock transaction.
The transaction is expected to be accretive to American Water's earnings in the first year after completion.
Under the terms of the agreement, Essential shareholders will receive 0.305 shares of American Water for each Essential share they own. The exchange ratio represents a premium of about 10% to Essential shareholders, based on the 60-day average stock prices of both companies.
Upon completion, American Water shareholders will own approximately 69% and Essential shareholders about 31% of the combined company.
The combined company will have a pro forma market capitalization of about $40 billion and a combined enterprise value of roughly $63 billion, based on the firms' closing stock prices as of October 24, 2025. Operating under the name American Water, the merged entity would have a water and wastewater rate base of about $29.3 billion as of the end of 2024, serving approximately 4.7 million water and wastewater connections across 17 states and 18 military installations.
The combined company plans to maintain American Water's existing earnings per share and dividend growth targets of 7%-9%. American Water also expects to maintain its long-term rate base growth target of 8-9% following completion of the merger.
Upon closing, American Water President and Chief Executive Officer John C. Griffith will serve as President and Chief Executive Officer of the combined company, while Essential Chairman and Chief Executive Officer Christopher H. Franklin will become Executive Vice Chair of the combined company's board. All existing executive team members of American Water who report to the CEO will continue in their roles post-close.
The transaction is expected to close by the end of the first quarter of 2027, after which American Water plans to review strategic alternatives for its non-water and non-wastewater businesses.
"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," said Griffith.
On Friday, American Water Works shares closed at $141.59, down 0.69%, while Essential Utilities shares closed at $41.21, down 0.22%.
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