BUSINESS COMBINATIONS

9 Months Ended

Sep. 30, 2020

NOTE 14 – BUSINESS COMBINATIONS

As part of the Company’s growth strategy, on April 2, 2020, Artesian Water purchased substantially all of the water system operating assets from the Town of Frankford, or Frankford, a Delaware municipality located in Sussex County, Delaware, including the right to provide water service to Frankford’s existing customers, or the Frankford Water System. The Frankford Water System serves approximately 360 customers. The total purchase price was 3.6 million. The acquisition was accounted for as a business combination under ASC Topic 805, “Business Combinations”. The purchase price allocation is primarily attributed to utility plant assets. Artesian Water utilized a cost approach to determine that the purchase price was reasonable. Goodwill was recognized primarily as a result of expected synergies of operations and interconnections to our existing utility plant infrastructure.

Additionally, as part of the Company’s growth strategy, on August 3, 2020, Artesian Water completed its purchase of substantially all of the water system operating assets from the City of Delaware City, or Delaware City, a Delaware municipality located in New Castle County, Delaware, including the right to provide water service to Delaware City’s existing customers, or the Delaware City Water System. The Delaware City Water System currently serves approximately 800 customers. The total purchase price was $2.1 million. The acquisition was accounted for as a business combination under ASC Topic 805. The preliminary purchase price allocation is expected to be primarily attributed to utility plant assets and will be finalized once the valuation of assets acquired has been completed, no later than one year after the acquisition date.

A summary of the allocation of purchase price to the assets acquired is presented in the table below and is recorded in the accompanying Condensed Consolidated Balance Sheet.

(In thousands)
Utility plant, at original cost
Source of supply plant	$	233
Pumping and water treatment plant		1,552
Transmission and distribution plant		3,333
Other deferred assets
Goodwill		623
Purchase Price	$	5,741

The Frankford Water System acquisition and the Delaware City Water System acquisition were approved by the DEPSC on March 18, 2020 and July 15, 2020, respectively, subject to the DEPSC determining the appropriate ratemaking treatment of the acquisition price and the assets acquired in Artesian Water’s next base rate case. The pro forma effects of the businesses acquired, individually and in the aggregate, are not material to the Company’s financial position or results of operations.