Summary
On the 23rd of October, Aqua America announced it will acquire natural gas provider Peoples.
The company will not over leverage its balance sheet, but will instead issue ~75 million shares.
Management admitted that the deal is not a synergy play.
I currently have a 1/4 position and will not increase until management provides more information about the future of the company.
Intro
On the 9th of October, I wrote that Aqua America (WTR) was the company that would hedge my portfolio against the next recession. Arguments for picking Aqua America were (1) its relative cheap valuation compared to its peers, (2) its proven track record of great acquisitions (3) its water operations, which are one of the most reliable industries out there and (4) its dividend growth streak of 26 years. In my eyes, Aqua America was a bond-like investment with the benefit of growing dividends over time. However, management decided it was time for some action. On the 23rd of October, management announced that it would take over natural gas provider Peoples in a $4.3 billion deal. The deal is expected to close mid 2019. The market did not really like the deal and shares trade now ~13% lower. This article will analyze the acquisition with help of the acquisition of Peoples conference call. In the end, I will decide whether or not Aqua America will still hedge my portfolio.
