Eversource's Revised $64.00 Per
Share Proposal Represents a Less Than 1% Increase from Previously
Rejected $63.50 Per Share
Proposal
Following Comprehensive Review, Connecticut Water Service
Board Unanimously Rejects Eversource's Revised Proposal as
Inadequate and Not in Best Interests of Connecticut Water
Shareholders
Revised Proposal Continues to Fall Short on Value and
Stakeholder Benefits When Compared to SJW Group Merger as Well as
to Value that Connecticut Water Can Deliver on Standalone
Basis
Board Reiterates Willingness to Consider Any Proposal that
Delivers Shareholder Value Which Is Superior to that Provided in
SJW Group Merger of Equals
Board Believes Any Change-of-Control Acquisition Proposal
Should Exceed $69.50 Per
Share
Letter Sent to Eversource to Set the Record Straight
Regarding Eversource's Continued Mischaracterizations of
Connecticut Water's Willingness to Engage and the Significant Value
and Certain Benefits Created by the SJW Group Merger
CLINTON, Conn., July 13, 2018 /PRNewswire/ -- Connecticut
Water Service, Inc. (NASDAQ: CTWS) today announced that it recently
received a revised acquisition proposal from Eversource Energy
(NYSE: ES) to acquire all of the outstanding shares of Connecticut
Water common stock for $64.00 per
share in cash and/or in Eversource common stock at the election of
Connecticut Water shareholders. In accordance with the terms
of the SJW Group amended merger agreement, the Connecticut Water
Service Board of Directors, in consultation with its financial and
legal advisors, carefully reviewed Eversource's revised acquisition
proposal and unanimously concluded that it is not a superior
proposal as compared to the terms, value and benefits of the SJW
Group (NYSE: SJW) merger of equals. Moreover, the Board
unanimously determined that Eversource's revised proposal is
inadequate and still undervalues Connecticut Water on a standalone
basis.
In unanimously rejecting Eversource's revised proposal, the
Connecticut Water Service Board reiterated its willingness to
consider any proposal from Eversource or any other party that
delivers shareholder value superior to that provided in the SJW
Group merger. To date, no superior alternative proposal has
been received, even with Connecticut Water undertaking a public
go-shop process during which more than 50 potential bidders were
actively solicited. The company noted that Eversource was
among the parties invited to participate in this process, but it
declined to do so and instead has pursued a public misinformation
campaign.
Carol P. Wallace, Chairman of the
Connecticut Water Service Board, said, "Our Board has been, and
remains, committed to acting in the best interests of the company
and all Connecticut Water shareholders. Consistent with this
commitment, we have actively tried to engage with Eversource,
including providing operating and financial information,
participating in multiple conversations and providing access to the
company's Board, management and financial advisors. Despite
our engagement, Eversource submitted a revised proposal that
represents an increase of less than 1% from its April 5, 2018, proposal of $63.50 per share."
"While we have repeatedly tried to engage with Eversource,
including putting forth a reasonable counter proposal that better
reflected the value of the company, Eversource has failed to engage
with us in a meaningful way and has not materially modified its
proposal. The Connecticut Water Service Board believes that
any change-of-control acquisition proposal should provide value
superior to that created by the SJW Group merger of equals and
should compensate our shareholders with an appropriate premium that
reflects Connecticut Water's high-quality, highly desirable and
well-managed assets. Absent a full and fair proposal or any
indication from Eversource that it is willing to make such a
proposal, there is no basis for further discussions with
Eversource, particularly given the access and information already
provided to Eversource. Accordingly, we are directing our
attention to realizing the significant value and certain benefits
created by the merger with SJW Group," concluded Ms. Wallace.
As previously disclosed, on June 20,
2018, Eversource's financial advisor, Goldman Sachs Group,
Inc., contacted Connecticut Water's financial advisor, Wells Fargo
Securities, LLC, requesting a meeting to clarify aspects of
Eversource's $63.50 per share
proposal. Connecticut Water chose to accept the meeting and
provide Eversource with the opportunity to clarify its proposal in
order to confirm that every viable alternative to the merger with
SJW Group has been explored.
On June 29, 2018, Carol P. Wallace, Chairman of the Connecticut
Water Service Board, and David C.
Benoit, President and Chief Executive Officer of Connecticut
Water, and representatives from the company's financial advisor,
Wells Fargo, met with representatives from Eversource and its
financial advisor. During the meeting, Connecticut Water
engaged with Eversource to determine whether there was a viable
path forward with Eversource. Specifically, the parties
discussed areas that the Connecticut Water Service Board previously
determined were inadequate, including value for Connecticut Water
shareholders and benefits for the customers, employees and
communities served by Connecticut Water.
On July 2, 2018, Connecticut Water
received Eversource's revised, non-binding $64.00 per share proposal, which the Board, in
consultation with its financial and legal advisors, thoroughly
reviewed.
On July 7, 2018, Carol P. Wallace, Chairman of the Connecticut
Water Service Board of Directors, and David
C. Benoit, President and Chief Executive Officer of
Connecticut Water, sent the following letter to James J. Judge, Chairman, President and Chief
Executive Officer of Eversource, explaining the rationale for the
value placed on the SJW Group merger and reviewing the Board's
determination to reject the $64.00
per share proposal as inadequate, not superior to the SJW Group
merger and not in the best interests of Connecticut Water
shareholders:
July 7, 2018
Mr. James
J. Judge
Chairman, President and Chief Executive Officer
Eversource Energy
800 Boylston Street
Boston, MA 02199
Dear Jim:
Thank you for meeting with Carol
and me on June 29, 2018 and for
formally submitting Eversource's non-binding revised proposal to
acquire all of the outstanding shares of Connecticut Water common
stock for $64.00 per share in cash
and/or Eversource common stock on July 2,
2018.
As we shared with you on our call
on Saturday, July 7, 2018, after careful review and
consideration of the revised proposal, including consultation with
our financial and legal advisors, the Board of Directors of
Connecticut Water has unanimously determined that the revised
proposal, which represents a less than 1% increase from
Eversource's April 5, 2018 proposal
of $63.50, does not constitute a
superior proposal as compared to the terms, value and benefits of
the SJW Group merger. Moreover, the Board has unanimously
determined that Eversource's acquisition proposal is inadequate and
significantly undervalues Connecticut Water.
We wanted to take this opportunity
to reiterate for you in more detail the reasons for the Board's
determination.
We can get to $64.00 per share on our own, while preserving for
our shareholders even greater upside potential. Based on
our business plan, current trading levels and historic trading
multiples as a standalone company, the Connecticut Water Board of
Directors and management team believe that Connecticut Water's
common stock would, on its own, trade at a price similar to
Eversource's proposed price in the near term, and we would still
retain the ability to sell Connecticut Water at a premium in
connection with a future transaction or engage in some other value
maximizing transaction similar to the SJW Group merger.
The SJW Group merger adds
substantial value to Connecticut Water's standalone value both at
completion and over the long-term, and this value is significantly
greater than what you have proposed. Your $64.00 per share proposal is less than the
$64.72 per share implied value that
Connecticut Water shareholders would receive through the SJW Group
merger at its completion.1 Notably, even greater
value creation in the future is very achievable based on our
combined asset base, prospects for continued growth and
opportunities for M&A as either a buyer – or a seller.
Our internal estimates based on Connecticut Water's and SJW Group's
financial projections through 2022 (which have been made publicly
available in the Form S-4) imply a future value per Connecticut
Water share of $85.74 by 2023,
calculated by multiplying the pro forma earnings per share by an
average historical trading multiple of 25.0x (which is at the
midpoint of the multiples range for valuation of water
utilities). Discounting that $85.74 plus aggregate expected dividends back to
the beginning of 2018 at the average of the two combined companies'
weighted cost of equity, the present value per Connecticut Water
share under the SJW Group merger is more than $69.00. Completing the SJW Group merger
also retains and enhances the combined company's ability to both
attain further growth on a standalone basis (through acquisitions
and capital investments not currently contemplated by the
companies' financial projections) and sell the combined company at
an additional premium in connection with a future
transaction. Furthermore, in the SJW Group merger, we have
achieved for Connecticut Water shareholders a significantly higher
than average premium for a merger of equals transaction; in
contrast, your revised proposal constitutes a 22% premium, which is
substantially lower than the historical average premium of more
than 30% for utility acquisition transactions.
It is primarily for these reasons
that the Board of Directors of Connecticut Water unanimously views
the SJW Group merger as being substantially economically superior
to Eversource's revised proposal.
That said, and let me reiterate,
the Board of Directors is committed to acting in the best interests
of the Company and all Connecticut Water shareholders, and we stand
ready and willing to consider a full and fair proposal from
Eversource (or any other party) that delivers value and benefits
superior to those provided in the SJW Group merger.
To underscore this commitment, the
Board of Directors would be prepared to engage in further
discussions regarding a possible acquisition by Eversource if
Eversource submitted a proposal that exceeded $69.50 on or before Thursday, July 12,
2018. We believe this price is reasonable not only in light
of the value expected from the SJW Group merger, but also based on
the value we are confident we can deliver to Connecticut Water
shareholders on a standalone basis through the continued execution
of our business plan if the SJW Group merger is not
completed. The Board of Directors would also expect that any
transaction with a third party, including Eversource, would provide
employee, customer and community benefits at least as favorable as
those provided by the SJW Group merger. We note that we do
not see a need for the proposed paid advisory board role for
current members of the Board of Directors as suggested in your
July 2, 2018 proposal and would instead recommend that you
focus your attention on enhancing the value of your offer and
benefits to our stakeholders.
On behalf of the Board of
Directors of Connecticut Water Service, Inc.,
Sincerely,
Connecticut Water Service,
Inc.
By: /s/ Carol P.
Wallace By:
/s/ David C. Benoit
Name: Carol P.
Wallace
Name: David C. Benoit
Title: Chairman of the Board of
Directors Title:
President and Chief Executive Officer
On July 11, 2018, Connecticut
Water received a letter from Eversource reiterating its inadequate
$64.00 per share proposal. In
its letter, Eversource provided no movement toward Connecticut
Water's $69.50 per share
counterproposal, but instead continued to assert numerous
inaccuracies and mischaracterizations regarding the significant
value and certain benefits created by the SJW Group merger.
On July 12, 2018, Connecticut Water
sent the following letter to Eversource to set the record straight
and correct these inaccuracies and mischaracterizations:
July 12, 2018
Mr. James
J. Judge
Chairman, President and Chief Executive Officer
Eversource Energy
800 Boylston Street
Boston, MA 02199
Dear Jim:
We received your July 11,
2018 letter. We were surprised that, despite our multiple
conversations and the data provided, you failed to make any
movement toward our reasonable counter proposal and instead, simply
reiterated the $64.00 per share
proposal that you know our Board of Directors already determined
was inadequate, as detailed in our July 7,
2018 letter to you.
Moreover, Eversource's
July 11 letter continues to make inaccurate and misleading
statements that mischaracterize our engagement with Eversource and
the significant value and certain benefits provided by the SJW
Group merger. We want to set the record straight:
- The SJW Group merger is a merger of equals (MOE) transaction
and not a "sale" as you continue to wrongly
assert. This is an important distinction because an MOE
provides specific value and certain benefits to all of our
stakeholders that Eversource's acquisition proposal does not.
Indeed, in addition to the significant value the SJW Group merger
provides to our shareholders at closing and over the long-term, our
merger with SJW Group maintains a strong local workforce with no
layoffs, our long-standing commitment to outstanding customer
service, commitments for approximately $200
million of annual capital investments across the combined
operations, a commitment to environmental stewardship, and a
commitment to ongoing support of our communities, which is
fortified by our continuing New England headquarters located in
Clinton, CT. These benefits stand
in sharp contrast to Eversource's proposal, which is not only
silent on many of these stakeholder commitments, but also fails to
provide full and fair value for Connecticut Water
shareholders.
In addition, premiums for
acquisition transactions and MOE transactions are different.
Whereas Eversource's acquisition proposal is 11% below the
historical average premium for utility acquisition transactions, in
the SJW Group merger, we have achieved for Connecticut Water
shareholders a premium that is 13% higher than average
premiums for a utility MOE transaction.
- We have tried to actively engage with Eversource; it is
Eversource who is unwilling to meaningfully engage with Connecticut
Water. We have provided operating and financial information,
participated in multiple conversations and provided access to the
company's Board of Directors, management and financial advisors.
Eversource was also among the 50 parties invited to participate in
our go-shop process, but Eversource declined to do so.
Additionally, we put forth a reasonable counter proposal on
July 7, 2018, that better reflected
the value of the company and the value of the SJW Group merger.
Yet, Eversource has not materially modified its proposal and has
not made any movement in response to the counter proposal we
submitted.
- It is standard methodology to base the implied transaction
premium upon the true unaffected share price rather than the
midpoint of the discounted cash flow analysis, as you have
suggested. Referencing Connecticut Water's true unaffected
price per share, prior to the announcement of the SJW Group merger,
reduces the implied premium of Eversource's revised proposal, which
is meaningfully lower than the historical average premium paid in
comparable utility acquisition transactions.
- A 27.5x price-to-earnings multiple may be relevant for
integrated electric and gas utility companies, but does not
represent an "extremely compelling" valuation for an acquisition of
high-quality, highly desirable and well-managed pure-play water
assets like Connecticut Water. Additionally, our reasonable
counter proposal of $69.50 per share
implies a multiple of 29.8x our estimated 2018 earnings per share,
which is in line with the implied price-to-earnings multiples
achieved in other recent utility acquisition transactions.
- Our merger with SJW Group remains on track to close during
the fourth quarter of 2018. We are making progress with the
necessary approvals. For example, as previously announced, the
Federal Trade Commission has already granted early termination of
the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
- Eversource's proposal is inadequate and significantly
undervalues Connecticut Water. There is no reasonable basis for
Eversource's public assertions that its proposal is superior
to the SJW Group merger and we strongly object to these
continued references. We view Eversource's public statements in
this regard as false and as an attempt to mislead our shareholders
in order to prevent Connecticut Water from securing the vote
required to approve the SJW Group merger.
- The breakup fee provision in our merger agreement is
standard and customary, as Eversource's own prior merger shows.
The wisdom of the Connecticut Water Service Board of Directors in
agreeing to the customary breakup fee as part of securing the value
creating SJW Group merger – and not pursuing negotiations with
Eversource that may have jeopardized that transaction – has been
fully proven by Eversource's inability to submit a competitive, let
alone superior, proposal to the SJW Group merger.
Since Eversource has repeatedly
failed to provide a full and fair proposal and has provided no
indication that it is willing to make such a proposal, we are
directing our attention to realizing the significant value and
certain benefits created by the SJW Group merger, and we
respectfully request that Eversource cease its wrongful pursuit of
a plainly inferior proposal.
On behalf of the Board of
Directors of Connecticut Water Service, Inc.,
Sincerely,
Connecticut Water Service,
Inc.
By: /s/ Carol P.
Wallace By:
/s/ David C. Benoit
Name: Carol P.
Wallace
Name: David C. Benoit
Title: Chairman of the Board of
Directors Title:
President and Chief Executive Officer
Additional information supporting the Board's determination to
reject Eversource's revised proposal as inadequate and
significantly undervaluing the company will be available in a Form
8-K filed today with the U.S. Securities and Exchange Commission
and posted to www.sjw-ctws.com.
Connecticut Water remains subject to the SJW Group amended
merger agreement, and its Board has not changed its recommendation
regarding the SJW Group merger.
Wells Fargo Securities, LLC is serving as Connecticut Water's
financial advisor and Sullivan & Cromwell LLP as its legal
counsel.
About CTWS
CTWS is a publicly traded holding company headquartered in
Clinton, Connecticut. CTWS is the
parent company of The Connecticut Water Company, The Maine Water
Company, The Avon Water Company, and The Heritage Village Water
Company. Together, these subsidiaries provide water service to more
than 450,000 people in Connecticut
and Maine, and wastewater service
to more than 10,000 people in Connecticut.
Forward-Looking Statements
This document contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, as
amended. Some of these forward-looking statements can be
identified by the use of forward-looking words such as "believes,"
"expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "estimates," "projects," "strategy," or
"anticipates," or the negative of those words or other comparable
terminology.
The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions including, but not limited to, the
following factors: (1) the risk that the conditions to the
closing of the transaction are not satisfied, including the risk
that required approvals from the shareholders of CTWS or the
stockholders of SJW Group for the transaction are not obtained;
(2) the risk that the regulatory approvals required for the
transaction are not obtained, or that in order to obtain such
regulatory approvals, conditions are imposed that adversely affect
the anticipated benefits from the proposed transaction or cause the
parties to abandon the proposed transaction; (3) the risk that
the anticipated tax treatment of the transaction is not obtained;
(4) the effect of water, utility, environmental and other
governmental policies and regulations; (5) litigation relating
to the transaction; (6) uncertainties as to the timing of the
consummation of the transaction and the ability of each party to
consummate the transaction; (7) risks that the proposed
transaction disrupts the current plans and operations of SJW Group
or CTWS; (8) the ability of SJW Group and CTWS to retain and
hire key personnel; (9) competitive responses to the proposed
transaction; (10) unexpected costs, charges or expenses
resulting from the transaction; (11) potential adverse
reactions or changes to business relationships resulting from the
announcement or completion of the transaction; (12) the
combined companies' ability to achieve the growth prospects and
synergies expected from the transaction, as well as delays,
challenges and expenses associated with integrating the combined
companies' existing businesses; and (13) legislative and
economic developments. These risks, as well as other risks
associated with the proposed transaction, are more fully discussed
in the joint proxy statement/prospectus that is included in the
Registration Statement on Form S-4 filed by SJW Group with the
Securities and Exchange Commission (the "SEC") on April 25, 2018 in connection with the proposed
transaction, as amended by that Amendment No. 1 to Form S-4 filed
with the SEC on June 7, 2018 and that
Amendment No. 2 to Form S-4 filed with the SEC on June 25, 2018, and CTWS's quarterly report on
Form 10-Q for the period ended March 31,
2018 filed with the SEC on May 9,
2018.
In addition, actual results are subject to other risks and
uncertainties that relate more broadly to CTWS's overall business
and financial condition, including those more fully described in
CTWS's filings with the SEC including its annual report on Form
10-K for the fiscal year ended December 31,
2017 and SJW Group's overall business, including those more
fully described in SJW Group's filings with the SEC including its
annual report on Form 10-K for the fiscal year ended December 31, 2017. Forward looking
statements are not guarantees of performance, and speak only as of
the date made, and neither CTWS or its management nor SJW Group or
its management undertakes any obligation to update or revise any
forward-looking statements.
Additional Information and Where to Find It
In connection with the proposed transaction between CTWS and SJW
Group, SJW Group filed with the SEC a Registration Statement on
Form S-4, as amended by that Amendment No. 1 to Form S-4 filed with
the SEC on June 7, 2018 and that
Amendment No. 2 to Form S-4 filed with the SEC on June 25, 2018, that includes a joint proxy
statement of CTWS and SJW Group that also constitutes a prospectus
of SJW Group. CTWS will also file a GREEN proxy card with the
SEC, and CTWS and SJW Group may also file other documents with the
SEC regarding the proposed transaction. This document is not
a substitute for the joint proxy statement/prospectus, Form S-4 or
any other document which CTWS or SJW Group has filed or may file
with the SEC. INVESTORS AND SECURITY HOLDERS OF CTWS AND
SJW GROUP ARE URGED TO READ THE REGISTRATION STATEMENT, THE JOINT
PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS THAT
ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY
BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION AND RELATED MATTERS.
Investors and security holders may obtain free copies of the
Form S-4 and joint proxy statement/prospectus and any other
documents filed with the SEC by CTWS or SJW Group through the
website maintained by the SEC at www.sec.gov. Copies of
documents filed with the SEC by CTWS will be made available free of
charge on CTWS's investor relations website at
https://ir.ctwater.com. Copies of documents filed with the
SEC by SJW Group will be made available free of charge on SJW
Group's investor relations website at
https://sjwgroup.com/investor_relations.
No Offer or Solicitation
This communication is for informational purposes only and is not
intended to and does not constitute an offer to sell, or the
solicitation of an offer to subscribe for or buy, or a solicitation
of any vote or approval in any jurisdiction, nor shall there be any
sale, issuance or transfer of securities in any jurisdiction in
which such offer, sale or solicitation would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended, and otherwise in accordance
with applicable law.
Participants in the Solicitation
CTWS, SJW Group and certain of their respective directors and
officers, and other members of management and employees, may be
deemed to be participants in the solicitation of proxies from the
holders of CTWS and SJW Group securities in respect of the proposed
transaction between CTWS and SJW Group. Information regarding
CTWS's directors and officers is available in CTWS's annual report
on Form 10-K for the fiscal year ended December 31, 2017 and its proxy statement for its
2018 annual meeting dated April 6,
2018, which are filed with the SEC. Information
regarding the SJW Group's directors and officers is available in
SJW Group's annual report on Form 10-K for the fiscal year ended
December 31, 2017 and its proxy
statement for its 2018 annual meeting dated March 6, 2018, which are filed with the SEC.
Investors may obtain additional information regarding the interest
of such participants by reading the Form S-4 and the joint proxy
statement/prospectus and other documents filed with the SEC by CTWS
and SJW Group. These documents will be available free of
charge from the sources indicated above.
Connecticut Water Contacts
Daniel J. Meaney, APR
Director, Corporate Communications
(860) 664-6016
dmeaney@ctwater.com
Investors
Mike Verrechia / Bill Dooley
Morrow Sodali, LLC
(800) 662-5200
CTWS@morrowsodali.com
Media
Joele Frank, Wilkinson Brimmer
Katcher
Sharon Stern / Barrett Golden / Joseph
Sala
(212) 355-4449
1 Based on the 1.1375 exchange ratio and SJW
Group's closing stock price of $56.90
per share on April 25, 2018, the day
before California Water Service announced its proposal to acquire
SJW Group. The value per share of the merger of equals with
SJW Group is not fixed and fluctuates based on SJW Group's stock
price.
View original
content:http://www.prnewswire.com/news-releases/connecticut-water-service-confirms-receipt-and-evaluation-of-revised-acquisition-proposal-from-eversource-energy-300680603.html
SOURCE Connecticut Water Service, Inc.