Southwest Water succumbs to private equity buy-out

Southwest Water Company is to be bought by JP Morgan Asset Management and Water Asset Management LLC for a total enterprise value of $427 million, marking the largest public-to-private deal in the US investor-owned water utility sector since 2003.

SWWC shares rose by 47% on news of the deal, which values each share at $11.00 – a 56% premium to the previous closing price of $7.07. Speculation that this could spark a wave of M&A activity in the sector is premature, however – SWWC was viewed as uniquely vulnerable following a protracted account restatement nightmare last year.

The deal is expected to take up to twelve months to close, given the need to secure regulatory approvals in a number of jurisdictions, and analysts believe the decision to sell may have been accelerated by the departure of CFO David Stanton in late January. Stanton sold the majority of his 89,000 shares on departure.