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Biggest US Water Company Reveals Takeover Interest

During Fast Money's Dirty Trade feature, CEO Nicholas DeBenedictis reveals that his company Aqua American (WTR) - the biggest US water company-  has received takeover interest from potential buyers. "We have been approached," he says.

When Fast Money host, Dylan Ratigan asks whether the interested parties were strategic bidders or private-equity firms, DeBenedictis replies "both, as a matter of fact." He fails to provide further details, but added that Aqua American may also acquire smaller US water companies. "If anybody is for sale we’d be looking."

Here are more excerpts from the interview.

How’s business?

DeBenedictis says “Over a quarter trillion dollars will have to be invested just in our country (in water) over the next 20 years.”

Is there not enough clean water?

“Pipes are getting older; plants have to be upgraded and many of our municipalities have not taken care of (these maintenance issues)” says DeBenedictis. “So money will have to be spent because you can’t live without water.”

Tell us more.

“85% of the market is municipal (public). There are only 10 publicly traded water companies and there are about 30,000 small mom and pop companies,” DeBenedictis explains. “Part of the story for investors, is the roll up of these mom and pops -  and privatization of the municipal market into more efficient private hands.”

Are you selling water or pipes and such?

“We sell the water, “ says DeBenedictis. “But to get the water to your home we might have to invest in pipe and that’s what the regulators allow us to raise prices on.”

Why is stock flat over the year?

“Both VE and Suez (competitors) went down over the last few years and they’re coming back” explains DeBenedictis.

Water Trades

He adds, “We had a huge run 3 years in a row; and averaged 20% in a row over a 10 year period and (now) we have been stalled. But the numbers are there an the long term market is there.”

Was your stock ahead of itself?

“We were up 50% 2-years ago and probably got a little ahead of ourselves.” says DeBenedictis. “But the substance is there and we’re going to be spending money on pipe which will allow us to raise prices, which will in turn will allow us to get return for our investors.”

Do you view yourself as a company that might be approached by another company or a private equity?

"We have been approached," reveals DeBenedictis.

By whom?

"Vivendi, which was Veolia's spin off, owned 20% of our stock before they ran into trouble after they got into Universal, (and) the record business." DeBenedictis says. "Veolia (VE) got spun off, it was spun-off at an all time low and has now built itself back up because it's such a predictable product and pricing is so predictable."

Is SJW Corp (SJW) a company you’re thinking about buying?

"There are only 10 publicly traded (water companies). We’re the company with a $3 billion market cap – the other 9 add up to $3 billion," says DeBenedictis. "Obviously if anybody is for sale we’d be looking. But, these (small companies) are like collector cars in that you can only buy them if the owner wants to sell it."

Does the owner want to sell?

I can’t say.

Is there a catalyst that increases revenues, perhaps overnight?

“The EPA enforcement will make a difference in the expenditures on plants,” says DeBenedictis. “Regarding the pipes…it’s a necessity. It just has to happen.”

Eric Bolling reminds the panel he also likes Veolia (VE) and Suez (SZE) as well as SJW.

Dirty Trades

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Trader disclosure: On June 25, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders:Najarian Owns (.VIX), (TIF) Bolling Owns (SZE), (VE), Gold; Bolling Is Short (FXI) And Owns (FXI) Puts; Bolling Is Short S&P Futures; Bolling Is Short Nasdaq Futures; CNBC Is A Service Of NBC Universal And Dow Jones; GE Is The Parent Company Of CNBC

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