California Water Service Group Confirms Proposal to Acquire SJW Group for $68.25 Per Share in Cash
Proposal exceeds SJW’s all-time high closing price and represents 20% current premium
Combination would create a larger and stronger
California Water’s proposal delivers superior value to SJW
stockholders and other constituencies compared to proposed
Strategic and financial benefits of a transaction include:
- Superior value to SJW’s pending all-stock merger with
ConnecticutWater. California Water’s proposal would provide SJW stockholders with substantial and certain near-term value greater than SJW’s proposed all-stock merger with Connecticut Water given the current premium to SJW’s stock price.
- The creation of a larger and stronger
California-based water utility. SJW would be a superb strategic and operational fit that would enhance California Water’s position as the country’s third-largest regulated water utility, with a rate base of $1.9 billion. The company would be better positioned to anticipate and meet the needs of the more than 3,000,000 people it would serve in California, Washington, New Mexico, Hawaii, and Texas, including approximately 1.4 million people in the greater Bay Area. It would also have greater ability to invest in employees and offer broader career opportunities, as well as actively support the communities served.
- Firm commitments to deliver significant value to
Californiacustomers through this transaction, including sharing the benefits in ways partners without a local presence cannot. The transaction is expected to result in meaningful cost savings, which will be shared with customers. Working together, we are confident that customers would benefit from increased efficiencies and sharing of resources, our award-winning customer service programs, and leading-edge information technology systems.
- The ability to invest in critical infrastructure projects. Combining the two companies would enable continued investment in key projects needed to ensure a reliable water supply that meets increasingly stringent water quality standards. California Water is committed to maintaining both companies’ capital expenditure programs and would expect to increase investments post-transaction.
- Intimate familiarity with SJW and its operations. Since
California Water is headquartered in
San Jose, as is SJW, CaliforniaWater is intimately familiar with the community, its priorities, and its decision-makers. We also have deep insight into many of the operational, water supply, water quality, and environmental sensitivities of SJW’s system. This knowledge of SJW’s operations and adjoining service territories would also enable us to seamlessly integrate and efficiently operate the combined system.
The text of the letter sent today to
|April 26, 2018|
|Robert A. Van Valer|
|Lead Independent Director|
|110 West Taylor Street|
|San Jose, CA 95110|
|CC: Eric W. Thornburg, Chief Executive Officer and President; Daniel B. More, Board Member|
We are writing to reiterate our
Our compelling all-cash offer of
Unlike the Connecticut Water transaction, our proposed transaction offers substantial and certain value to SJW stockholders. In the Connecticut Water transaction, your stockholders would have to wait for uncertain benefits that, by your own admission, would accrue over the long term, while bearing the substantial execution risks associated with operating in two separate businesses located 3,000 miles apart in different regulatory environments. Why should your stockholders forego superior certain value based on your promises of long-term accretion that may never materialize?
The combination of SJW and
In addition, we firmly believe our proposal offers substantially greater benefits to customers, employees and the communities we collectively serve than the Connecticut Water transaction, and these benefits support our belief in our ability to achieve timely regulatory approval.
- Customer Benefits& Cost Savings: We are prepared to
make firm commitments to deliver significant value to
Californiacustomers, including sharing the benefits we receive in ways that partners without a strong local presence cannot. We expect the transaction to result in meaningful cost savings which we can share with customers. We believe our combined customer base will receive better service through increased operational efficiencies, additional resources, award-winning customer service, and leading-edge information technology systems.
- Commitment to Employees: CombiningSJW and
Cal Waterwould lead to greater opportunities for employees. Operations and customer service personnel would benefit from more opportunities and resources to enhance their careers by working for a larger California-based water utility. We share the same union and would honor all of SJW’s existing collective bargaining agreements. We would not reduce the combined company’s union-represented front line operations or customer service personnel. We do not anticipate any significant changes to employee compensation or benefits.
- Serving Our Local Communities:
Cal Wateractively supports our communities. We have a proven track record of working successfully with the California PUC and community leaders. In 2017, we donated to over 320 local community organizations. SJW customers would benefit from our continued emphasis on improving the quality of life in our communities.
- Environmental Stewardship: Improving water quality and environmental stewardship are key pillars of Cal Water’s strategy. Our industry-leading efforts, combined with increased size and scale, will enable us to bolster key programs such as conservation, affordability, sustainability, environmental protection, and assistance to neighboring disadvantaged communities that do not have access to safe and reliable water.
We are committed to pursuing this transaction. We have sought for many years to work with you on a business combination on a friendly, constructive and private basis. We have been consistently rebuffed and thus have no option but to make our compelling proposal public. We are convinced that the substantial benefits of this transaction for stockholders and other constituencies merit an open-minded evaluation by the SJW Board of Directors who will now have the ability to consider feedback from stockholders and others.
We stand ready to engage, and have the resources internally and externally to move expeditiously toward completing confirmatory due diligence and finalizing definitive agreements. We would appreciate your timely response.
|Martin A. Kropelnicki||Peter C. Nelson|
|Chief Executive Officer and President||Chairman of the Board|
|California Water Service Group||California Water Service Group|
Additional Investor and Conference Call Information
This news release contains forward-looking statements within the meaning
established by the Private Securities Litigation Reform Act of 1995
(“Act”). The forward-looking statements are intended to qualify under
provisions of the federal securities laws for “safe harbor” treatment
established by the Act. Forward-looking statements are based on
currently available information, expectations, estimates, assumptions
and projections, and management’s judgment about the Company, the water
utility industry and general economic conditions. Such words as would,
expects, intends, plans, believes, estimates, assumes, anticipates,
projects, predicts, forecasts or variations of such words or similar
expressions are intended to identify forward-looking statements. The
forward-looking statements are not guarantees of future performance.
They are subject to uncertainty and changes in circumstances. Actual
results may vary materially from what is contained in a forward-looking
statement. Factors that may cause a result different than expected or
anticipated include, but are not limited to: the failure to consummate
the proposed transaction with SJW upon the terms set forth in Cal
Water’s proposal; governmental and regulatory commissions’ decisions;
changes in regulatory commissions’ policies and procedures; the
timeliness of regulatory commissions’ actions concerning rate relief;
changes in environmental compliance and water quality requirements;
electric power interruptions; changes in customer water use patterns and
the effects of conservation; the impact of weather and climate on water
availability, water sales and operating results; civil disturbances or
terrorist threats or acts, or apprehension about the possible future
occurrences of acts of this type; labor relations matters as we
negotiate with the unions; restrictive covenants in or changes to the
credit ratings on our current or future debt that could increase our
financing costs or affect our ability to borrow, make payments on debt
or pay dividends; and, other risks and unforeseen events. When
considering forward-looking statements, you should keep in mind the
cautionary statements included in this paragraph, as well as our annual
10-K, Quarterly 10-Q, and other reports filed from time-to-time with the
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