Business Combination

12 Months Ended

Dec. 31, 2020

On October 9, 2019, SJW Group completed the merger with CTWS, a company that provides water service throughout Connecticut and Maine. In addition, CTWS has a real estate company in Connecticut which provides property management services.

SJW Group acquired all of the outstanding stock of CTWS for $70.00 per share in cash (without interest and less any applicable withholding taxes). The total cash purchase price was approximately $838,476, less cash received of $3,011, and approximately $6,384 related to outstanding awards of restricted stock units and deferred share units assumed in connection with the merger.

The following table summarizes the purchase price and recording of fair values of assets acquired and liabilities assumed as of the acquisition date and subsequent adjustments as of December 31, 2020.


	Amounts Previously Recognized as of Acquisition Date (a)		Measurement Period Adjustments	Amounts Recognized as of Acquisition Date (as Adjusted)
Assets acquired:
Utility plant, net	$	750,703	—	750,703
Nonutility plant	848		—	848
Current assets	42,673		(785)	41,888
Investments	12,489		—	12,489
Regulatory assets and deferred charges, less current portion	83,132		(4,346)	78,786
Other intangible assets	17,181		—	17,181
Other assets	2,592		—	2,592
Goodwill	626,523		(114)	626,409
Total assets acquired	1,536,141		(5,245)	1,530,896
Liabilities assumed:
Long-term debt	281,009		—	281,009
Current liabilities, including maturities of long-term debt	125,772		25	125,797
Deferred income taxes	107,789		(5,411)	102,378
Postretirement benefit plans	31,789		—	31,789
Contributions in aid of construction and construction advances	137,327		—	137,327
Other long-term liabilities	10,607		141	10,748
Total liabilities assumed	694,293		(5,245)	689,048
Assumed equity	$	841,848	—	841,848

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(a)As previously reported in the SJW Group’s 10-K for the period ended December 31, 2019.

Other intangible assets primarily consists of customer relationships.

The goodwill balance is primarily attributable to assembled workforce and diversification of markets both from a geographic and regulatory perspective. We do not expect the goodwill recognized in connection with the transaction will be deductible for income tax purposes.

The company analyzed and revalued the acquired opening deferred tax asset and liability balances within the measurement period which resulted in a decrease to goodwill of $114. The revaluation of acquired deferred tax assets and liabilities and related uncertain tax positions based upon facts and circumstances that existed as of the acquisition date resulted in adjustments that were recorded to goodwill. In addition, tax related valuation allowances assumed in connection with a business combination were initially estimated as of the acquisition date. Revaluation within the measurement period resulted in release of the valuation allowance as it is more likely than not that the new combined group will be able to utilize the acquired deferred tax assets. There was no impact associated with the measurement period adjustments to the consolidated statement of comprehensive income for the year ended December 31, 2020.

The following unaudited pro forma financial information summarizes the combined results of operations for SJW Group and CTWS, as though the companies were combined as of January 1, 2018.


	Fiscal Year Ended December 31,
	2019		2018
Total revenues	$	515,153	514,364
Pretax income (loss)	60,862		72,938
Net income (loss)	56,968		65,449
Basic earnings per share	2.00		2.31

The historical consolidated financial information has been adjusted in the pro forma combined financial statements to give effect to pro forma events that are: (1) directly attributable to the transaction, (2) factually supportable and (3) expected to have continuing impact on the combined results of SJW Group and CTWS. As such, the impact of non-recurring transaction related expenses is not included. The pro forma financial statements do not reflect all cost savings (or associated costs to achieve such savings) from operating efficiencies or synergies that could result from the transaction. In addition, the pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at January 1, 2018.