American Water Works IPO Review

Another proposed IPO is in the making. This time it belongs the basic necessities of life.
The American Water Works which is making business out of the wastewater and water utilities is planning to come out with its Initial public offering or IPO. The company has filed the IPO proposal document to SEC on Monday the 31st March 2008.

Size of American Water Works IPO: 64 million shares

Price Band of American Water Works IPO: $24 to $26 a share

A wholly owned subsidiary of RWE which is a European electricity and gas company, American Water works is operating primarily in the USA. The RWE is planning to sell American Water in more than one offering through its subsidiary Thames Water Aqua Holdings GmbH.
Even after the sale of shares through the IPO, RWE will remain the majority shareholder as it will continue to own about 60 percent of the American Water's common stock.
Thames Water Aqua Holdings is selling all of the shares in the IPO. American Water will not receive any of the proceeds from the offering.
As per the news, American Water expects to have 160 million shares outstanding after the IPO for a potential market capitalization of between $3.8 billion and $4.2 billion.
American Water is in the business of regulated water and wastewater utilities which serve all kinds of clients - residential, commercial and industrial customers, while treating and delivering over 1 billion gallons of water per day. Entire business of the company is regulated by the PUC or Public Utility Commissions. Now this is one of the major risk areas for the investors interested in buying the shares of this company. If by any chance, the PUC changes the norms and standards for providing the water, it will have a direct impact on the business of American Water Works.

According to the filing, American Water serves 15.6 million people in 32 states and Ontario, Canada. The company has nearly 7,000 employees.

In 2007, American Water's loss from continuing operations more than doubled to $342.3 million, compared with a loss of $155.9 million in 2006. The company's revenue rose 6 percent to $2.21 billion, from $2.09 billion. American Water noted that it is working to correct several weaknesses in its internal control over financial reporting.

Goldman Sachs Citigroup and Merrill Lynch have been appointed as the IPO's lead underwriters. The other underwriters are Credit Suisse Securities, JP Morgan and Morgan Stanley, among others. The underwriters have been given an option to buy up to 9.6 million additional shares from the selling stockholder.

The company plans to list its shares on the New York Stock Exchange under the symbol "AWK."

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