American Water Works Company, Inc. and Essential Utilities, Inc.’s Boards of Directors have unanimously approved a definitive agreement to combine in an all-stock, tax-free merger, creating a premier, regulated U.S. water and wastewater utility with a pro forma market capitalization of approximately $40 billion and an enterprise value of approximately $63 billion, based on closing stock prices as of Oct. 24, 2025.

The utilities look forward to uniting their talented teams to address water and wastewater challenges nationwide, combining their expertise, financial strength, and regulatory credibility to enhance infrastructure and meet customers’ evolving needs.

“This combination brings together two industry leaders united by our shared mission to provide safe, clean, reliable, and affordable water and wastewater services,” said John C. Griffith, President and CEO of American Water. “Our enhanced scale and operational efficiency will support continued investment in critical infrastructure and superior customer service.”

Christopher H. Franklin, Chairman and CEO of Essential, added, “Throughout Essential’s nearly 140-year history, we have consistently led with purpose to shape a future rooted in sustainability, innovation, resilience, and best-in-class service for our customers. We are confident that the combined company will build upon our longstanding track record of delivering safe and reliable services and be better positioned to solve today’s challenges while creating a sustainable future.”

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 approximately 10 percent 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. Upon completion of the merger, American Water shareholders will own approximately 69 percent, and Essential shareholders will own approximately 31 percent of the combined company
on a fully diluted basis.

Combination Provides Expansive Benefits to Key Stakeholders

• Advances the shared mission of delivering essential utility services. Providing safe, clean, reliable, and affordable water and wastewater services will be of the utmost importance to the combined company. Management will continue to work closely with the EPA and federal, state, and local officials to deliver the quality of water that customers have come to expect from American Water and Essential, while also adhering to safety and sustainability best practices.
• Delivers attractive, long-term capital investment profile with the ability to provide increased solutions to water and wastewater challenges across an expanded footprint. American Water expects to maintain its long-term rate base growth target of eight to nine percent upon the closing of the merger, positioning the company to continue to provide high-quality service to customers. The combined company will continue to allocate capital to infrastructure renewal, resiliency, water quality, technology, and growth projects.
• Upholds commitments to employees and provides greater long-term opportunities. The combined company unites two highly skilled and experienced teams in the regulated utility space, with a greater ability to attract, develop, and retain employees and create long-term opportunities for career growth. The combined company does not anticipate material changes to employee compensation or benefits as a result of the transaction. Both companies value their union
  partnerships, and all union contracts will continue to be honored in accordance with their current terms.
• Strengthens commitment to communities, including water affordability. The combined company will remain an active member in the communities it serves, supporting customers and stakeholders with a dedicated workforce and passionate employee base. American Water and Essential each have a strong history of charitable giving, which will remain central to the combined organization. There will be no change in customer rates as a result of the merger, and American Water and Essential will be better able to maintain an average customer water bill that is affordable, supporting the economic prosperity of the more than 2,000 communities in which the combined company will operate.

Transformative Merger Driven by Compelling Strategic, Customer, and Financial Rationale

• Bolsters significant regulated water and wastewater utility providers. The combined company would have a water and wastewater rate base of approximately $29.3 billion (1) as of the end of 2024, with approximately 4.7 million water/wastewater connections across 17 states and on 18 military installations. With a larger footprint and customer base as well as increased geographic diversity, the combined company will be well-positioned to deliver operational leverage, better customer service, and broader customer reach.
• Supports long-term EPS and DPS growth of seven to nine percent for the combined company. 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 seven to nine percent earnings per share and dividend growth targets post close. Subject to market conditions and board approval, the parties expect the combined company to adopt American Water’s current dividend policy and payout target range. Both companies expect to maintain their existing dividend policies until the transaction is completed.
• Creates a more resilient utility with improved credit quality and a strong balance sheet. The credit profile and metrics of the combined company are expected to remain strong, benefiting from diversified service territories and regulatory exposure, and a broader customer and revenue base. As a large-cap, regulated utility, the combined company will continue to have ready access to the equity capital markets. There is no debt issuance related to the transaction.
• Includes an industry-leading natural gas (LDC) utility that provides optionality to the combined company. Peoples Natural Gas is growing its rate base at a rate that exceeds ten percent annually. In the five years since Essential has owned the company, it has doubled its rate base and substantially improved its risk profile. The Peoples regulated subsidiaries provided natural gas services to approximately 705,000 customers in western Pennsylvania and an additional approximately 41,000 in Kentucky as of the end of 2024.

Leadership, Board of Directors, Headquarters, Combined Company Name

Upon closing of the transaction, Griffith will serve as President and Chief Executive Officer of the combined company, and 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. David Bowler, American Water Executive Vice President and CFO, will serve as Executive Vice President and Chief Financial Officer, and all existing executive team members of American Water who report to the CEO will continue to do so post-close. Additionally, Daniel Schuller, Essential Executive Vice President and CFO, will serve as Executive Vice President and Chief Strategy Officer; Colleen Arnold, President of Essential Aqua Water, will serve as President, Regulated Operations; and Michael Huwar, President of Peoples Natural Gas, will remain President and continue to lead the natural gas business.

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 Griffith, and five directors designated by Essential, including Franklin. Karl Kurz, independent Chair of the American Water board of directors, will continue to serve in such role after the closing of the transaction.

The combined company will be headquartered in Camden, N.J., 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.”

Non-Water and Non-Wastewater Businesses

Upon closing of the transaction, 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.

Timing to Close and Approvals

The transaction is expected to close by the end of the first quarter of 2027, subject to customary closing conditions, including, among others, approval from each company’s shareholders, clearance under the Hart-Scott-Rodino Act, and regulatory approvals, including approval from the applicable public utility commissions.

Advisors

BofA Securities is serving as the exclusive financial advisor to American Water, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor. Moelis & Company LLC is serving as the exclusive financial advisor to Essential, and Gibson, Dunn & Crutcher LLP is serving as legal advisor. Joele Frank, Wilkinson Brimmer Katcher, is serving as strategic communications advisor for both companies.

American Water and Essential Third Quarter 2025 Earnings Results

American Water expects to release its financial results for the third quarter of 2025 after the market closes on Oct. 29, 2025. Presentation slides and accompanying remarks reviewing third-quarter results, 2026 earnings guidance, and long-term financial targets will be posted to American Water’s investor relations website after-market on Oct. 29. Essential expects to release its financial results for the third quarter of 2025 following the market close on Nov. 4. Essential will post webcast remarks and associated materials on Nov. 5 at 9:00 AM ET.

In light of the transaction announcement, both companies will not host earnings calls or associated question and answer sessions this quarter. Both companies expect to resume their typical earnings conference calls in 2026.

American Water is the largest regulated water and wastewater utility company in the United States. With a history dating back to 1886, the utility’s motto, “We Keep Life Flowing,” rings true by providing safe, clean, reliable, and affordable drinking water and wastewater services to more than 14 million people with regulated operations in 14 states and on 18 military installations. American Water’s 6,700 talented professionals leverage their significant expertise and the company’s national size and scale to achieve excellent outcomes for the benefit of customers, employees, investors, and other stakeholders.

Learn more about the upcoming merger and how Essential Utilities delivers safe, clean, reliable services that improve the quality of life for individuals, families, and entire communities. With a focus on water, wastewater, and natural gas, Essential is committed to sustainable growth, operational excellence, a superior customer experience, and premier employer status. Essential is an advocate for the communities it serves and is a dedicated steward of natural lands, protecting thousands of acres of forests and other habitats throughout its footprint.

Operating as the Aqua and Peoples brands, Essential serves approximately five and a half million people across nine states. Essential is one of the most significant publicly traded providers of water, wastewater services, and natural gas in the U.S.

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(1) Excludes gas rate base of $4.2bn and includes Net Utility Plant not yet included in rate base, pending rate case
filings/outcomes.