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Water Industry Deals and News – March and April 2019

May 9, 2019

This issue of our Water Report includes select transactions, litigation developments, and updates involving the O’Melveny Water Practice, and other items of interest occurring throughout the water industry during March and April of 2019. Please contact any member of the O’Melveny Water Practice for additional information on any of these items or other water-related issues.

O’Melveny Water Practice Highlights

  • Russ McGlothlin joins O’Melveny’s Water Practice
  • Matt Kline and Buzz Thompson were named runners-up for The American Lawyer’s Litigation Attorneys of the Week for their representation of Coachella Valley Water District
  • O’Melveny’s Water Practice represents Ontario Teachers’ Pension Plan in their acquisition of Broetje Orchards and Renewable Resources Group in the sale of California vineyards

Key Recent Deals: O’Melveny represented the Ontario Teachers’ Pension Plan Board in its acquisition of Broetje Orchards, an apple producer and one of the largest family owned and operated orchards in the State of Washington. The deal involved both the sale of the company and over 8,000 acres of apple orchards. Broetje Orchards grows, packs, and ships nearly seven million boxes of apples each year, including the proprietary Opal apple under the “FirstFruits” brand. O’Melveny also represented Renewable Resources Group, the owner of Sun World International, in connection with the sale of Sun World’s leased and owned California farming properties and operations in the Coachella and San Joaquin Valleys. The acreage, consisting largely of vineyards for table grape production, was acquired by an undisclosed investment group that has contracted with Sun Pacific to farm the grape vineyards.

Key Litigation Win: On April 19, a federal district court delivered a victory for the O’Melveny Water team that got two of its members (Buzz Thompson and Matt Kline) named runner-up Litigation Attorneys of the Week by The American Lawyer magazine. In this important ruling, the trial court held that O’Melveny’s client, the Coachella Valley Water District (CVWD), could not be enjoined from importing Colorado River water to the Coachella Valley. The Agua Caliente Band of Indians had sued CVWD arguing that CVWD was over-drafting the basin and polluting it with Colorado River water, but the Court held that the Tribe did not have standing to pursue these claims as it had not proven any injury. CVWD supplies water to hundreds of thousands of households in the region, as well as to the five tribes in the Coachella Valley and scores of farmers.

Key Awards: In March 2019, O’Melveny’s Water Practice won California Environment/Natural Resources Litigation Law Firm of the Year at the annual Benchmark Litigation’s US West Coast ceremony in San Francisco, and Water Practice chair Matt Kline was named California Environment/Natural Resources Litigation Attorney of the Year.

Key New Hire: The O’Melveny Water Practice is also deeply proud to welcome Russ McGlothlin to our group. Russ is a leading water resources attorney with decades of experience advising clients on water use and management matters. Russ was instrumental in drafting California’s Sustainable Groundwater Management Act, and he has extensive experience managing, resolving, and litigating groundwater disputes. He is also a go-to advisor for businesses and public agencies with water concerns and needs.


Represented Ontario Teachers’ in its acquisition of Broetje Apple Orchards
   

Secured a significant summary judgment victory for Coachella Valley Water District in its ongoing litigation with the Agua Caliente Band of Indians
     
 
O’Melveny and Water Practice chair Matt Kline honored as California Environment/Natural Resources Litigation Law Firm and Attorney of the Year

   
Representing Renewable Resources Group, the owners of Sun World International, in the sale of Sun World’s leased and owned farming properties in the Coachella and San Joaquin Valleys

Water Industry Overview

March and April 2019 saw a number of announced and completed acquisitions in the water industry, including acquisitions of six water utility systems in the Pacific Northwest by NW Natural Water Company, the $107 million purchase of Water-Right, Inc. by A.O. Smith Corporation (NYSE: AOS), and the acquisition of a water utility by Hawaii Water Service Company, a subsidiary of California Water Service Group (NYSE: CWT). The past couple of months also featured a $200 million equity round financing for Layne Water Midstream Holdings, LLC, a midstream business providing water solutions to upstream oil and gas companies; the $1.6 billion purchase of deep water oil and gas rights in the Gulf of Mexico; and a $10 million capital investment in a chemical-free water treatment company.



CLEARAS Water Recovery, Inc.

March 4, 2019

Clearas Water Recovery, Inc., a chemical-free and biologically-based water treatment technology company, raised $10 million in capital from Montcalm Capital via the issuance of senior notes.

Montcalm Capital is dedicated to finding capital-raising solutions to companies delivering a positive environmental impact. Montcalm Capital will invest in CLEARAS Water Recovery through its flexible capital fund, Montcalm Capital Fund I.

 


Whistler Water, Inc.

March 5, 2019

Whistler Water, Inc., a Canadian manufacturer and supplier of bottled water, entered into a letter of intent to acquire Waterfront Capital Corporation (TSXV: WFG.H) in a reverse merger transaction. Under the announced terms, Waterfront Capital will issue common shares to the shareholders of Whistler Water, Inc. in a structure that will result in the combined entity being controlled by Whistler Water’s existing shareholders. Waterfront also intends to complete a related CAD 4 million equity financing. Herbert He, the current CEO of Whistler Water, will become the new CEO of the combined company.

The transaction is subject to the execution of a definitive agreement, satisfactory due diligence on behalf of the parties, required shareholder approvals, and listing requirements of the Toronto Stock Exchange Venture Exchange.

Water Intelligence plc

March 7, 2019

Water Intelligence plc (AIM: WATR) completed the acquisition of its American Leak Detection South Atlanta franchise on March 7, 2019. American Leak Detection, a subsidiary of Water Intelligence plc, provides non-invasive water leak detection and remediation services throughout the United States and in Canada, Europe, and Australia.



 



Air Water, Inc.

March 14, 2019

Air Water, Inc. (TYO: 4088), a Japanese producer of industrial gases and equipment, announced that it acquired a 63% stake in Genki, K.K., a Japanese food and consumer drinking water producer with revenues of over ¥850 million in 2018.

 



Water Ways Technologies, Inc.

March 18, 2019

Water Ways Technologies (TSXV: WWT), a designer and installer of turnkey irrigation and agricultural equipment solutions, entered into a letter of intent to acquire the assets of a Canadian distributor of irrigation and agricultural equipment.

The acquisition, which is expected to close in the second quarter of 2019, is subject to customary diligence reviews, the finalization of a definitive agreement, and applicable regulatory approvals.


   


Hawaii Water Service Company, Inc.

March 20, 2019

On March 20, 2019, Hawaii Water Service Company, Inc., a subsidiary of California Water Service Group (NYSE: CWT), agreed to acquire the Kalaeloa Water Company LLC, a water and wastewater utility that services customers and large resorts near Honolulu, Hawaii, from Hunt Companies, Inc. Financial terms were not disclosed.

California Water Service Group serves nearly two million people throughout the western United States and Hawaii.



Gravity Oilfield Services

March 21, 2019

Gravity Oilfield Services, Inc., a portfolio company of Clearlake Capital Group LP, announced its acquisition of certain water disposal infrastructure assets in the Bakken region from MBI Oil & Gas, LLC. Financial terms were not disclosed.


   

NW Natural Water Company, LLC

March 22, 2019

NW Natural Water Company, LLC, a subsidiary of Northwest Natural Holding Company (NYSE: NWM), announced it signed agreements to acquire six water utility systems and one water and wastewater management company in Idaho and Washington.

The water systems covered by the agreements include the water systems of Spirit Lake East, Lynnwood, Diamond Bar Estates, and Bar Circle “S” in Sequim, Washington, as well as Water Works Management. Financial terms for the transactions were not disclosed.

The acquisitions are subject to regulatory approval by the Washington Utilities and Transportation Commission and the Idaho Public Utilities Commission and are expected to close in third quarter of 2019.


 

Kentucky American Water Company

April 8, 2019

Kentucky American Water Company acquired water and wastewater assets from the City of North Middletown, Kentucky.


   

A.O. Smith Corporation

April 8, 2019

A.O. Smith Corporation (NYSE: AOS), a manufacturer of commercial and residential water equipment, acquired Water-Right, Inc., a producer of residential treatment systems, and Mineral-Right, Inc. The reported consideration paid for Water-Right, Inc., its subsidiaries, and related real estate was approximately $107 million. Water-Right reported annual sales of approximately $60 million in 2018.


 

APANA, Inc.

April 9, 2019

APANA, Inc. announced that it received $11 million in a Series B financing round led by existing investor Kurita Water Industries, Ltd. The financing also included involvement from E8 Fund, The Urban Innovation Fund, and Cowles Company.


 
 

Behrman Capital

April 10, 2019

Behrman Capital acquired Waterline Renewal Technologies, Inc. from Triwater Holdings, LLC. Waterline’s existing management team will continue to run the company.


 

Layne Water Midstream Holdings, LLC

April 11, 2019

Layne Water Midstream Holdings, LLC, a full-cycle water midstream business providing water sourcing services and solutions to upstream oil and gas companies, announced that it would receive $200 million in an equity funding round led by existing investors Post Oak Energy Capital, LP and Genesis Park, LP.


   

California American Water Company

April 16, 2019

California American Water Company agreed to purchase the operating assets of Warring Water Service, Inc., a water utility company based in Ventura County, California.


 

California American Water Company

April 19, 2019

California American Water Company agreed to acquire the assets of East Pasadena Water Company, a water utility based in Los Angeles County, California.



   

Murphy Exploration & Production Company

April 23, 2019

Murphy Exploration & Production Company - USA, a Houston, Texas-based oil and gas exploration company, signed an agreement to acquire deep water Gulf of Mexico assets from LLOG Exploration Offshore LLC and LLOG Bluewater Holdings LLC for approximately $1.6 billion.


 

Air Water, Inc.

April 24, 2019

Air Water, Inc. (TYO: 4088), a Japanese producer of industrial gases and equipment, purchased a 95% stake in Ecofroz, S.A., an Ecuadorian fruits and vegetables producer with net sales of ¥4.4 billion in 2018.



   

XRI Holdings, LLC

April 24, 2019

XRI Holdings, LLC purchased the water treatment and recycling division of Fountain Quail Energy Services, LLC in a cash and equity transaction. The division will retain the Fountain Quail name and will be operated as a wholly-owned subsidiary of XRI Holdings, LLC.


 

CleanCore Technologies

April 25, 2019

CleanCore Technologies, a Nebraska-based manufacturer of aqueous ozone cleaning products, acquired O-Z Tech Water. After the acquisition, CleanCore Technologies announced that it will change its name to CleanCore Solutions.
   



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