May 11, 2018
Martin A. Kropelnicki
Chief Executive Officer
California Water Service Group
1720 North First Street
San Jose, CA, 95112
Re: SJW Group
PREC14A filed May 2, 2018
DFAN14A filed May 2, 2018
DFAN14A filed May 11, 2018
Filed by California Water Service Group
File No. 001-08966
Dear Mr. Kropelnicki:
We have limited our review of your proxy statement to those issues we
have addressed in
our comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by amending your filing and providing the
requested
information. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing any amendment to your filing and the information you
provide in
response to these comments, we may have additional comments.
General
1. We note your statement that your proposal would be "economically
superior" to the
proposed CTWS Merger for SJW stockholders; however, it is not clear how
you are
measuring such economic superiority, given that you cannot know with
certainty what
value might accrue to SJW shareholders if the CTWS merger is consummated.
Please
revise to clarify the basis for this statement or remove such statements.
2. We also note your statement that, "if the Proposed CTWS Merger is
completed, the SJW
stockholders will retain their SJW Shares and receive no premium, while
paying CTWS
shareholders a premium of 18% . . . ." Given that the matter subject to
approval by
SJW's stockholders is the issuance of additional shares to CTWS--not the
receipt of
additional consideration--these statements are inappropriate without
acknowledging as
much.
Martin A. Kropelnicki
California Water Service Group
May 11, 2018
Page 2
3. Where you assert the risks to the combined entity of operating in a
different regulatory
environment 3,000 miles away, please balance the disclosure by noting
that SJW's
current CEO Eric Thornburg previously ran CTWS and, therefore, is
presumably familiar
with both regulatory environments at this point and certainly with the
regulatory
environment in which CTWS operates.
4. On page 1 and elsewhere in the proxy statement where you use similar
language, clarify
what you mean by the reference to "timely."
5. Each statement or assertion of opinion or belief must be clearly
characterized as such,
and a reasonable factual basis must exist for each such opinion or
belief. Please provide
support for the following statements:
If the Proposed CTWS Merger is completed, SJW stockholders would "be
forced to
wait for uncertain economic benefits that would not fully accrue
until the long term"
(in supporting this belief, modify this assertion to define what you
mean by the "long
term" in this context and to explain the basis for your belief that
the combination of
SJW and CTWS would not immediately represent an economic benefit to
SJW
shareholders);
The Board and CEO of the post-merger entity "are largely unfamiliar
with the San
Jose community and unique challenges of running a California-based
water utility,"
and that 6 out of 12 directors for the new SJW/CTWS Board would come
from
CTWS, considering our understanding that, immediately following the
merger, 7 of
the 12 board members will be selected by SJW Group (Mr. Thornburg is
currently
employed by SJW despite the fact that he was formerly associated
with CTWS);
Your belief that "regulators in [Connecticut and Maine] have no
formal relationships
with SJW given SJW's lack of operations in either state" (see our
comment above
regarding Mr. Thornburg's prior relationship with CTWS);
"We are confident in our ability to finance this transaction . . .
;" and
The acquisition by California Water of SJW would require regulatory
approvals
"which we believe we can timely obtain" (provide support and also
explain what you
mean by "timely" in this context).
Solicitation of Proxies, page 15
6. State the total amount estimated to be spent and the total expenditures
to date. Refer to
Item 4(b)(4) of Schedule 14A.
Martin A. Kropelnicki
California Water Service Group
May 11, 2018
Page 3
Schedule II, page II-1
7. In this section you purport to disclose the security ownership of SJW
principal
stockholders and management, but your disclosure appears incomplete. In
this regard,
we note that you do not disclose ownership of deferred stock awards or
restricted stock
units covering shares of SJW's common stock. Please amend to provide
complete
disclosure, or remove references to any incomplete disclosure regarding
beneficial
ownership.
DFAN14A Filed May 2, 2018
8. Please confirm your understanding that any soliciting material
published, sent, or given to
security holders must be filed with the Commission no later than the
date the material is
first published, sent, or given to security holders. In this regard, we
note that your press
release dated April 26, 2018 was not filed with the Commission until May
2, 2018. Refer
to Rule 14a-12(b).
9. See our comment above. Each statement or assertion of opinion or belief
must be clearly
characterized as such, and a reasonable factual basis must exist for
each such opinion or
belief. Please provide support for the following statements:
"California water offers a clear path to completing the transaction
in a timely manner
(emphasis added);"
The SJW Board has engaged in a "continuing and emerging pattern of
governance
practices that hurt their stockholders, employees, customers, and
local communities;"
You will "ensure that SJW stockholders have all the facts and
resources necessary to
determine the best path forward for SJW. California Water is
communicating closely
with employees, customers and local communities...;"
The "SJW all-stock merger with Connecticut Water is clearly inferior
for SJW
stockholders (emphasis added);"
You are "widely recognized as one of the industry's leading
employers...;"
"[C]ustomers would receive benefits from cost savings and better
service..." and
"meaningful cost savings to be shared with customers;"
"[M]eaningful synergies [are] expected," and you expect the proposal
to "be accretive
to earnings;" and
You have "intimate familiarity with SJW and its operations."
Martin A. Kropelnicki
California Water Service Group
May 11, 2018
Page 4
10. We note your disclosures in your Proposal presentation slides related
to your offer
summary. Please refrain from implying that your offer is certain,
considering your
proposal is non-binding and subject to numerous regulatory approvals.
For example, you
discuss the benefits of the proposal in present terms. Refer to
Exchange Act Rule 14a-9.
DFAN14A filed May 11, 2018
11. See our comment above. Each statement or assertion of opinion or belief
must be clearly
characterized as such, and a reasonable factual basis must exist for
each such opinion or
belief. Further, please refrain from implying that SJW has made an
untrue statement, as
opposed to stating its views that certain facts support certain
determinations. In this
regard, we note your statements that:
"SJW's Board of Directors is continuing to resort to fear-mongering
and hyperbole,
while ignoring the facts, to pressure its stockholders into
accepting an inferior no-
premium transaction;"
"SJW failed to disclose [a] highly material fact (emphasis added)"
and "continues to
hide it from its stockholders;" and
"It's time for SJW's Board to stop making baseless assertions
(emphasis added)" and
is continuing with a "misinformation campaign."
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Please contact Katherine Bagley, Staff Attorney, at (202) 551-2545, Mara
Ransom,
Assistant Director, Office of Consumer Products, at (202) 551-3720, or me at
(202) 551- 3263
with any other questions.
Sincerely,
/s/ Christina Chalk
Christina Chalk
Senior Special
Counsel
Office of Mergers
and Acquisitions