American Water Works, Essential Utilities to merge

American Water Works and Essential Utilities are merging in an all-stock deal that will create a public water utility worth about $40 billion.

The combined company, which will use the name American Water, will have about 4.7 million water connections across 17 states and on 18 military installations, from Hawaii to Pennsylvania.

Essential shareholders will receive 0.305 shares of American Water for each share of that they own. American Water shareholders will own about 69% and Essential shareholders will own approximately 31% of the combined company once the merger is complete.

There will be no change in customer rates tied to the merger.

American Water said that it plans to review strategic options for its non-water and non-wastewater businesses once the deal closes.

The combined company does not expect material changes to employee compensation or benefits as a result of the deal. All union contracts will continue to be honored in accordance with their current terms.

“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,” American Water CEO John Griffith said in a statement Monday.

Griffith will serve as president and CEO of the combined company. Essential Chairman and CEO Christopher Franklin will become executive vice chair for the board.

The combined company’s board will have 15 members. It will include the 10 directors serving on American Water’s board prior to the transaction’s closing, which includes Griffith. Five directors will be designated by Essential, including Franklin. Karl Kurz, independent chair of American Water’s board, will continue to serve in such a role after the deal is completed.

The combined company will be headquartered in Camden, NJ, where American Water is based. Essential’s Bryn Mawr and Pittsburgh offices will each continue to maintain a strong operational presence long term.

The deal is expected to close by the end of the first quarter of 2027. It still needs approval from each company’s shareholders and approval from the applicable public utility commissions.

Shares of American Water Works fell 3.5% in morning trading, while Essential Utilities’ stock declined slightly.