Utilities announce cross-country merger

Just five months after he left his job as chairman, president and chief executive officer of Connecticut Water Service to go to work for the SJW Group, Eric Thornburg helped engineer a merger with his former employer.

The $750 million deal that combines San Jose-based SJW Group with Connecticut Water is “a merger of equals,” Thornburg said as the deal was announced Thursday. Connecticut Water shareholders will receive 1.1375 shares of SJW Group common stock, which is the equivalent of $61.86 per share, for each share of common stock in the Clinton-based utility that they own.

“Not too long after I got out here, it became clear that this would be a strong fit of corporate cultures,” he said, adding that discussion of a merger didn’t predate his arrival in California. Because there is no geographic overlap in their service territories, none of Connecticut Water’s 249 employees in Connecticut and Maine will lose their jobs as a result of the merger, Thornburg said.

Connecticut Water serves more than 93,000 customers in 56 Connecticut communities. The utility serves customers in Beacon Falls, Bethany, Clinton, Deep River, Guilford, Killingworth, Madison, Old Saybrook and Westbrook in the New Haven area.

The utility also has about 41,000 customers in 24 communities in Maine. Connecticut Water operates a wastewater treatment system in Southbury that has 3,000 customers.

SJW Group has more than 700 employees.

David Benoit, president and chief executive officer of Connecticut Water, said the merger “was made from a position of strength.” Benoit will become president of SJW’s New England region once the merger is complete.

“This will benefit Connecticut Water’s customers because it will give us a strong balance sheet and better access to capital, which is important because we have been looking at some capital investments,” he said.

Thornburg’s characterization of the deal not withstanding, SJW is a much bigger company than Connecticut Water, said David Cadden, a professor emeritus at Quinnipiac University’s School of Business. And that will mean the major corporate decisions will come out of California, rather than Connecticut.

Connecticut Water Service is less than half the size of SJW Group in terms of the number of people served. The Connecticut company serves more than 425,000 people its subsidiaries, while its California counterpart serves more than 1 million in Texas and California.

Once Connecticut Water shareholders have exchanged their shares for those of SJW Group, they will own 40 percent of the newly merged company. SJW Group shareholders will have a 60 percent ownership stake.

Cadden said he expects to see additional acquisitions in the water utility business, possibly involving SJW Group and its East Coast corporate partner.

“There’s a recognition that water is going to be the21st century equivalent of oil,” Cadden said. “Because of global warming, we’re running out of water and by coalescing larger and larger volumes of customers, companies are able to exert greater influenceon the market.”