Business Combination Business Combination

9 Months Ended

Sep. 30, 2020

Business Combination

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 September 30, 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		(1,167		)	41,506
Investments	12,489		—			12,489
Regulatory assets and deferred charges, less current portion	83,132		(4,307		)	78,825
Other intangible assets	17,181		—			17,181
Other assets	2,592		—			2,592
Goodwill	626,523		(1,222		)	625,301
Total assets acquired	1,536,141		(6,696		)	1,529,445
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		(7,145		)	100,644
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		424			11,031
Total liabilities assumed	694,293		(6,696		)	687,597
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 $1,222 during the third quarter of 2020. There was no impact associated with the measurement period adjustments to the condensed consolidated statement of comprehensive income for the nine months ended September 30, 2020.

Goodwill is not amortized but is tested for impairment annually, as of the first day of the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not, reduce the fair value of a reporting unit below its carrying amount. SJW Group first performs a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test. In assessing the qualitative factors, SJW Group considers the impact of these key factors: change in industry and competitive environment, financial performance, macroeconomic conditions, and other relevant Company-specific events. If SJW Group determines that as a result of the qualitative assessment it is more likely than not (> 50% likelihood) that the fair value is less than carrying amount, then a quantitative test is performed.