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Artesian Resources' Subsidiary Acquires Cantwell Water Assets

Zacks Equity Research

Artesian Resources Corporation ARTNA announced that its principal subsidiary, Artesian Water Company, Inc., has completed the acquisition of water assets of the Cantwell Water Company based in Odessa, DE. However, the financial details of the acquisition were kept under wraps.

Following the acquisition, Artesian will now operate over the newly expanded area in southern New Castle County where Cantwell used to operate.  Further, the buyout will allow the 40 existing consumers of Cantwell system to access the fully-integrated water system of Artesian.

Recent Acquisitions

In a bid to enhance its service base, Artesian Resources – the water, wastewater services provider – has been making meaningful acquisitions and recently took steps toward expanding water operations.

Earlier this week, Artesian Resources through its subsidiary, Artesian Water gained full regionalization of drinking water throughout its southern New Castle County service area. In fact, the company’s transmission and distribution teams completed several critical service connections this month, with new water assets acquired in the Town of Odessa.

Artesian Resources’ transmission and distribution teams serviced and repaired connections to fully integrate its existing water mains into a single regionalized system delivering water service in Middletown, Odessa, Townsend and their surrounding communities.

In early June, Artesian Water purchased the water assets in the Fort DuPont Historic District, New Castle County, DE. The deal involved a public-private investment of over $1 million by Artesian, the Fort DuPont Redevelopment and Preservation Corporation, as well as state and local governments for redeveloping the 325-acre historic waterfront community located on the Delaware River.

With these and the prior buyouts, Artesian Resources’ system now offers water service to the Veteran’s Watchmaker Initiative, Odessa Town Hall, Cantwell’s Tavern, properties of the Historic Odessa Foundation and private residences. Apart from expanding customer base, these buyouts also came in line with the company’s commitment to provide a reliable source of safe, high-quality drinking water to the surrounding commodity.

Consolidation – The Current Need

Consolidation is the need of the hour in the fragmented U.S. water utility space. The water infrastructure in the U.S. has aged and needs to undergo extensive repair and overhaul. It comes down to big players like Artesian Resources to make notable investments for upgrading and maintaining the water and wastewater systems.

In this regard, Aqua America Inc. WTR successfully completed a few acquisitions in the first quarter of 2017. Its pending acquisition will add another 8,600 customers to existing base after it is completed over the course of the year.

Global Water Resources Inc. GWRS expanded operation through acquisition of the Eagletail Water Company in the month of May. With this step the company initiated its acquisition driven expansion strategy and more buyouts are anticipated in coming days.

American Water Works AWK is expected to add nearly 33,000 customers in 2017 through acquisitions out of which 13,000 customers have already been added in the first quarter of 2017.

Thus we can clearly see the consolidation steps adopted by the major water service providers, in recent times, to drive the necessary infrastructure overhauls for the industry at large. We believe the recent water assets’ acquisition by Artesian reflects its progress toward that strategy and expect more such deals to take place, going ahead.

Price Movement

In the last 12 months, Artesian Resources has outperformed the Zacks categorized Utility- Water Supply industry. During this period, the company’s shares rallied 18.7% compared with the industry’s gain of 7.6%.

As the company generates the majority of earnings from regulated operations, a favorable regulatory climate might have driven the outperformance.

Zacks Rank

Artesian Resources currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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