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SAN JOSE/MAGNOLIA - H2O America (NASDAQ:HTO), a water utility with a market capitalization of $1.79 billion and a strong dividend track record spanning 54 years, announced Tuesday that its Texas Water Company subsidiary will acquire Quadvest, a regulated water and wastewater utility operating in the Houston metro area, for $540 million. InvestingPro data shows the company has maintained impressive revenue growth of 12.3% over the last twelve months.
The transaction will more than double H2O America’s connections in Texas, with the state projected to become the company’s second-largest utility operation by 2028 based on net income. Quadvest currently operates 50 water treatment plants and 27 wastewater treatment plants serving approximately 69 developments with over 47,000 active connections. With an EBITDA of $302 million and a gross profit margin of 56.8%, H2O America demonstrates strong operational efficiency in its existing operations.
According to the agreement, Texas Water Company will acquire Quadvest’s regulated systems for $483.6 million, while Texas Water Operation Services will purchase systems owned by Quadvest Wholesale LLC for $56.4 million.
"The addition of Quadvest to TWC is a unique opportunity to strategically diversify, enhance, and expand H2O America’s operations in one of the nation’s fastest-growing regions," said Andrew F. Walters, CEO of H2O America, in the press release announcing the deal.
The acquisition will increase H2O America’s Texas customer base from approximately 7% to 17% of its total service connections, with projections to reach 26% by 2029. The combined entity will become the second-largest investor-owned water and wastewater utility in Texas based on connections.
H2O America plans to finance the transaction through a combination of privately placed debt and equity infusions, maintaining its current credit ratings. The company expects to increase its five-year capital spending plan to approximately $2.1 billion, a 6% increase. InvestingPro analysis indicates the company operates with a significant debt burden, with a debt-to-equity ratio of 1.33 and current ratio of 0.66. Subscribers to InvestingPro can access 6 additional key insights about H2O America’s financial health and growth prospects.
The transaction, unanimously approved by H2O America’s board of directors, is expected to close by mid-2026, pending regulatory approvals from the Public Utility Commission of Texas and antitrust clearance. Analysts maintain a positive outlook on the stock, with price targets ranging from $57 to $66, suggesting potential upside from current levels despite trading above InvestingPro’s Fair Value estimate.
In other recent news, H2O America has made significant leadership changes. Megan Mattern has been appointed as the new chief accounting officer, effective July 28, replacing Ann P. Kelly, who will transition to the roles of chief financial officer and treasurer on July 1. Mattern’s compensation package includes a base salary of $425,000, with additional incentives and stock unit awards under the company’s Long-Term Incentive Plan. Meanwhile, Andrew F. Walters, the current chief financial officer, will join the Board of Directors and is set to become the company’s CEO following the retirement of Eric W. Thornburg on June 30, 2025. Walters has been with H2O America for over 11 years and has played a key role in the company’s financial growth and strategic acquisitions. His future plans include focusing on stakeholder relationships and capital expenditure strategies. These developments were announced in recent press releases and filings with the Securities and Exchange Commission.
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