Middlesex Water Company MSEX recently announced that its unit Tidewater Utilities, Inc. (“TUI”) has acquired the water assets of the Town of Ocean View (“TOV”) in Sussex County, DE, for $4.6 million. The acquisition of TOV’s assets will expand Middlesex Water’s operation in Delaware and add 900 customers to its existing base.

These customers have been receiving water supply from TUI since the system was constructed in 2008. On Feb. 19, 2025, the Delaware Public Service Commission approved TUI’s application to purchase the water assets of TOV and the right to provide water service to its existing customers.

Consolidation Essential in the Fragmented Water Industry

Per the American Society of Civil Engineers (“ASCE”), nearly 50,000 community water systems and 14,000 wastewater treatment systems in the United States are providing water solutions to customers. Some of the service providers are too small and have limited financial strength to carry out essential and costly repairs on time, leading to pipeline breakage, disruption of services and increased possibility of contamination.

Per the ASCE finding, due to the delay in pipeline repairs and maintenance, billions of gallons of treated water are lost every year in the United States. The wastage of water will continue to increase the operating expenses of the water utilities.

The fragmented industry creates operational challenges as small water utilities have limited financial capabilities to meet the requirements for replacement and maintenance of the aging water and wastewater infrastructure.

Large water utility companies continue to acquire small players to ensure the extension of high-quality services to customers and the investment required to upgrade old and acquired assets. Since mergers and acquisitions are taking place at a very slow pace, more consolidation is essential to reap the benefits.

Water Utilities Continues to Acquire

Other water utilities are making acquisitions to further expand their operations and extend high-quality services for customers. American Water Works AWK expanded its operation through systematic acquisitions. In 2024, the company completed 13 acquisitions, which added 69,500 customers. Including customers added through acquisitions, American Water Works added 90,000 customers to its existing base. American Water Works’ pending 17 acquisitions (as of Jan. 1, 2025), when completed, will add another 24,200 customers.

Essential Utilities WTRG, another water utility, is actively exploring opportunities to expand utility operations through the acquisition of municipal assets. Since 2015, Essential Utilities has expanded utility operations by completing many water and wastewater acquisitions, adding more than 129,000 customers. Essential Utilities’ pending seven acquisitions, when completed, will add 213,000 customers to its existing base.

California Water Service Group CWT is also making strategic acquisitions to expand its operations. In December 2024, CWT’s subsidiary Hawaii Water Service has finalized an agreement to acquire Kukui’ula South Shore Community Services’ wastewater system assets. In May 2024, California Water Service completed the acquisition of Kings Mountain Park Mutual Water Company's water system assets. Acquisition of assets near its existing property will increase the water-supply reliability and firefighting capabilities of California Water Service.

Price Performance of MSEX

In the past year, shares of MSEX have gained 37.9% compared with the industry’s 18.8% growth.

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MSEX’s Zacks Rank

Middlesex Water Service currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank ( Strong Buy) stocks here.

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