Global Water Resources (GWRS) Reports Acquisition of Red Rock Utilities
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Global Water Resources, Inc. (NASDAQ: GWRS) has signed a definitive agreement to acquire Red Rock Utilities, an operator of a water utility and a wastewater utility with service areas in the Pinal and Pima counties of Arizona. The definitive agreement follows the Global Water’s letter of intent to acquire the utilities which was announced in June.
Combined, the acquisitions will add 1,654 connections and approximately 9 square miles of service area, which generates more than $1 million in revenue annually. In addition, Red Rock Utilities is currently in a revenue phase-in period stemming from their last rate case, wherein it is projected to increase revenue by over $300,000 once rates are fully phased in. The closing is subject to customary conditions, including the approval of the Arizona Corporation Commission, and is anticipated to occur in October.
“This acquisition represents the third and fourth utilities we’ve acquired in the last 18 months in our declared strategy of again pursuing utility consolidation,” said Global Water Resources' president and CEO, Ron Fleming. “We believe our focus on consolidating, improving, and automating water and wastewater utilities can greatly benefit our customers, and we look forward to serving these new communities.”
The sellers are affiliates of Diamond Ventures, a highly reputable real estate development and investment company in Arizona. “It was time to transfer ownership of the utilities to a utility management company,” said Mark Weinberg, SVP for Diamond Ventures. “We determined that Global Water would be the best utility partner to consolidate these systems into their professional integrated utility platform, and to operate these utilities for our communities moving forward.”
For Global Water, these utilities represent an expansion of its service area in Pinal County and a new entry into Pima County near Tucson, Arizona. Both service areas have growth potential. Pinal County’s active service area is located directly along I-10 between Phoenix and Tucson, a high growth area known as “Arizona’s Sun Corridor.”
“Our acquisition efforts complement our annualized organic connection growth rate, with year-to-date active connections up 5.7%,” added Fleming. “In fact, with the addition of these two utilities and Turner Ranches Water and Sanitation Company that we acquired earlier this year, we’re on track to achieve overall double-digit connection growth rate in 2018.”
Global Water Resources acquisition strategy is supported by the Arizona Corporation Commission’s desire for consolidation of Arizona’s highly-fragmented water utility industry, as demonstrated in the commission’s new policy guidelines that support and incentivize consolidation.
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