NEWARK – Artesian Resources, the water and wastewater utility company, expects to raise $34.8 million in a new share sale – its first in more than a decade.
Artesian supplies 8.7 billion gallons of water per year through 1,442 miles of water main to over a third of Delawareans. It has been steadily growing its service network to include southern Delaware in recent years.
Artesian plans to sell 695,650 shares of the class A non-voting common stock at a purchase price of $50 per share in an underwritten public offering, the company announced Friday. The sale is tentatively set to close Tuesday.
The company has also granted the underwriter a 30-day option to purchase up to an additional 104,348 shares of class A non-voting common stock at $50 a share, less the underwriting discount – totaling about $5.2 million. Janney Montgomery Scott LLC is acting as sole book-running manager.
Notably, the shares that trade on the New York Stock Exchange are Class A non-voting stock, meaning shareholders have essentially no say in the management of the company. As of March 7, members of the founding Taylor family, including CEO and President Dian C. Taylor, Senior Vice President Nicholle R. Taylor, director John R. Eisenbrey Jr., and Louisa Taylor Welcher, owned 70.7% of Class B voting stock.
News of the new shares diluting current holdings dropped the company’s share price about 10% Friday, and it has crept back about 1% since. Artesian had about 8.63 million shares on the market at the end of the first quarter.
Proceeds of the stock sale, most of which will likely be purchased by institutional investment funds like its largest shareholder, New York hedge fund BlackRock, will reportedly fund general corporate purposes, including its capital investment program and repayment of outstanding indebtedness. Artesian had about $176.2 million in long-term debt at the end of the first quarter.
The company had about $115,000 in cash and cash equivalents at the end of the first quarter, although that is not uncommon in the cyclical nature of its business – peak water consumption occurs in the summer. However, first quarter revenue and earnings per share both missed analyst projections, according to Seeking Alpha.
Seeking to boost revenues, Artesian also applied for its first water rate increase in Delaware in nine years in April.
“Earnings in the first quarter this year were significantly impacted by continuing inflationary pressures, increased depreciation expense, increased short-term interest rates, and certain non-recurring expenses … The rate filing seeks recovery of the significant necessary investments made in the utility plant since our last filing in 2014, as well as recognition of increased operating costs,” said Nicki Taylor, president of Artesian Water Company, the principal subsidiary of Artesian Resources Corporation, in a statement.
The company last sold shares in 2011, when it raised about $15 million.
