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Market Savvy | SAVVY CONFIDENTIAL: A Briefing for Investors

Deal Would Condense List of Water Stocks

November 17, 1998|Bloomberg News, Times Staff

There aren't all that many investor-owned water companies in the marketplace, and now there will be one less.

California Water Service Group (ticker symbol: CWT), based in San Jose, on Sunday agreed to buy Long Beach-based Dominguez Services Corp. (DOMZ) for about $58 million in stock.

California Water would exchange 1.18 of its shares for each Dominguez share.

California Water shares closed unchanged at $26.75 on the New York Stock Exchange on Monday.

That values the deal at about $31.57 for each Dominguez share. Dominguez stock rose as high as $30 on Monday but closed unchanged at $26.50 on Nasdaq, well below the deal value.

These stocks are thinly traded, but they've been attractive to some individuals in recent years because of their relatively high dividend yields. The current annual yield on California Water shares is 4%.

The combined company would have sales of $211 million and provide water to 1.64 million people. The deal would allow California Water to compete better in the key Los Angeles area and enter the water-rights trading business, a right granted to Dominguez by the state, said Jim Good, a California Water spokesman.

California Water, the largest publicly held water company in California, is parent of California Water Service Co. and CWS Utility Services. Dominguez owns and operates Dominguez Water Co., Antelope Valley Water Co. and Kern River Valley Water Co.

"This should increase interest in other water companies because of the big premium paid," said Tim Winter, an A.G. Edwards analyst.

But there aren't many companies to choose from. Coincidentally on Monday, shareholders of Philadelphia Suburban Corp. (PSC) and Consumers Water Co. (CONW) approved their merger.

Other major public water companies are United Water Resources (UWR), $20 on the NYSE on Monday, and American Water Works (AWK), $32.50. on the NYSE.

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