American Water Works Company Inc. and Essential Utilities Inc. agreed Oct. 27 to a merger that will create a $40 billion company serving 4.7 million people in 17 states.
Each company’s board of directors has unanimously approved a definitive agreement to combine the companies in an all-stock, tax-free merger as a leading regulated U.S. water and wastewater public utility. The companies estimate such a combination will create market capitalization of about $40 billion and a combined enterprise value of approximately $63 billion, based on closing stock prices as of Oct. 24, 2025.
Upon closing of the transaction, American Water President and Chief Executive Officer, John C. Griffith will serve as president and chief executive officer of the combined company, and Essential Chairman and Chief Executive Officer Christopher H. Franklin will serve as executive vice chair of the board of directors of the combined company. Franklin will also serve as executive sponsor of the integration task force.
The combined company will be based in Camden and Essential’s Bryn Mawr and Pittsburgh offices will each continue to maintain a strong operational presence long term. The combined company will continue to use the name “American Water.”
The companies said there will be no change in customer rates as a result of the merger.
Once the transaction is complete, American Water plans to conduct a review of strategic alternatives for its non-water and non-wastewater businesses. No assurance can be given that any transaction or other strategic outcomes would result from the review.
The transaction is expected to close by the end of the first quarter of 2027.
“This combination brings together two industry leaders united by our shared mission to provide safe, clean, reliable and affordable water and wastewater services to our customers,” said Griffin. “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. We look forward to bringing together the talented teams of both companies to help solve the many water and wastewater challenges across the country and expand our customer base.”
Under the terms of the agreement, Essential shareholders will receive 0.305 shares of American Water for each share of Essential they own at the closing of the transaction. This exchange ratio implies a premium of about 10% to Essential shareholders based on the average of the daily volume weighted average price of each company’s common stock over the 60-trading-day period ending Oct. 24, 2025.
Upon completion of the merger, American Water shareholders will own about 69% and Essential shareholders will own approximately 31% of the combined company on a fully diluted basis.
The transaction is expected to be accretive to American Water’s earnings per share in the first year following close, and the combined company expects to maintain American Water’s 7%-9% earnings per share and dividend growth targets post close. The parties expect the combined company to adopt American Water’s current dividend policy and payout target range.
The combined company’s 15-member board of directors will include the 10 directors serving on American Water’s board of directors prior to the closing of the transaction, including Mr. Griffith, and five directors designated by Essential, including Mr. Franklin.
BofA Securities is serving as exclusive financial adviser to American Water, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal adviser.
Moelis & Company LLC is serving as exclusive financial adviser to Essential, and Gibson, Dunn & Crutcher LLP is serving as legal adviser.
Joele Frank, Wilkinson Brimmer Katcher is serving as strategic communications adviser for both companies.
American Water shares declined $3.16, or 2.2%, to $138.39, in NASDAQ real time trading. The shares have risen 11.6% so far this year.
Essential Utilities began in 1886 as the Springfield Water Company.
