Filed by Essential
Utilities, Inc.
pursuant to Rule
425 under the Securities Act of 1933
and deemed filed
pursuant to Rule 14a-6(b)
under the Securities
Exchange Act of 1934
Subject Company:
Essential Utilities, Inc.
Commission File
No.: 001-06659
Date: January
7, 2026
TO: All Essential Employees
FROM: Chris Franklin
SUBJECT: Integration Planning
Update – Definitive Proxy Statement Filed
Colleagues,
I hope this note finds you and your
families well as we enter 2026. I’d like to share a brief update regarding the merger with American Water.
On New Years Eve, we filed a Definitive
Proxy Statement (DEFM14A) with the Securities and Exchange Commission, and we have set February 10, 2026, as the date for our
shareholders to vote on the proposed merger of Essential Utilities and American Water.
This vote represents an important
step in the merger process, but I want to be clear about what it means, and what it does not mean, for our employees.
What This Means
| · | Filing
the Definitive Proxy Statement provides shareholders with important detailed information
about the proposed transaction. |
| · | American
Water has similarly filed a definitive proxy statement and will also hold their own shareholder
meeting on February 10, 2026. |
What This Doesn’t Mean
| · | As
we’ve said all along, there is no change to our daily operations, our focus,
or our expectations for performance and professionalism. We continue to operate as Essential
Utilities, serving our customers safely and reliably, executing our strategy, and investing
in the systems and communities that rely on us. |
Assuming shareholders of both companies
approve their respective merger proposals on February 10, the merger cannot close until all required regulatory approvals have
been granted. This is expected to occur by the end of the first quarter in 2027, and it will be “business as usual”
for each company until closing.
Additionally, we and American Water
have successfully made state regulatory filings in Pennsylvania, New Jersey, North Carolina, Texas, Illinois, Kentucky, and Virginia.
While merger-related milestones can
naturally generate questions or external attention, our priority remains constant: running the business, supporting one another,
and delivering for our customers. That focus, and the people behind it, is what makes us who we are.
As always, we are committed to transparent
and timely communication. As the merger process advances, we will continue to share additional information.
Thank you for your continued dedication
and for the important work you do every day.
Sincerely,
Chris
Cautionary Statement Regarding
Forward-Looking Statements
Certain statements included in
this communication are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of
1995. In some cases, these forward-looking statements can be identified by words with prospective meanings such as
“intend,” “plan,” “estimate,” “believe,” “anticipate,”
“expect,” “predict,” “project,” “propose,” “assume,”
“forecast,” “outlook,” “future,” “likely,” “pending,”
“goal,” “objective,” “potential,” “continue,” “seek to,”
“may,” “can,” “will,” “should” and “could,” or the negative of
such terms or other variations or similar expressions. Forward-looking statements may relate to, among other things:
statements about the benefits of the proposed merger, including future financial and operating results; the parties’
respective plans, objectives, expectations and intentions; the expected timing and likelihood of completion of the merger and
related transactions; the results of any strategic review; expected synergies of the proposed merger; the timing and result
of various regulatory proceedings related to the proposed merger, and other general rate cases, filings for infrastructure
surcharges and other governmental agency authorizations and proceedings, and filings to address regulatory lag; the combined
company’s ability to execute its current and long-term business, operational, capital expenditures and growth plans and
strategies; the amount, allocation and timing of projected capital expenditures and related funding requirements; the future
impacts of increased or increasing transaction and financing costs associated with the proposed merger or otherwise, as well
as inflation and interest rates; each party’s ability to finance current and projected operations, capital expenditure
needs and growth initiatives by accessing the debt and equity capital markets and sources of short-term liquidity; impacts of
the proposed merger on the future settlement or settlements of a party’s forward sale agreements, including potential
adjustments to the forward sale price or other economic terms thereunder, and the amount of and the intended use of net
proceeds from any such future settlement or settlements; the outcome and impact on other governmental and regulatory
investigations; the filing of class action lawsuits and other litigation and legal proceedings related to the proposed
merger; the ability to complete, and the timing and efficacy of, the design, development, implementation and improvement of
technology and other strategic initiatives; each party’s ability to comply with new and changing environmental
regulations; regulatory, legislative, tax policy or legal developments; and impacts that future significant tax legislation
may have on each such party and on its business, results of operations, cash flows and liquidity. These
forward-looking statements are predictions based on currently available information, the parties’ current respective
expectations and assumptions regarding future events that American Water Works Company, Inc. (“American Water”)
and Essential Utilities, Inc. (“Essential Utilities”) believe to be reasonable. They are not, however, guarantees
or assurances of any outcomes, performance or achievements, and readers are cautioned not to place undue reliance upon them.
You should not regard any forward-looking statement as a representation or warranty by American Water, Essential Utilities or
any other person that the expectation, plan or objective expressed in such forward-looking statement will be successfully
achieved in any specified time frame, or at all. The forward-looking statements are subject to a number of estimates and
assumptions, and known and unknown risks, uncertainties and other factors. Actual results may differ materially from those
discussed in the forward-looking statements included in this communication as a result of the factors discussed in American
Water’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange
Commission (the “SEC”) on February 19, 2025 (available at: ir.amwater.com), Essential Utilities’ Annual
Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 27, 2025 (available at:
essential.co), and each party’s other filings with the SEC, and additional risks and uncertainties, including with
respect to (1) the parties’ ability to consummate the proposed merger pursuant to the terms of the definitive merger
agreement or at all; (2) the ability to timely or at all obtain the requisite shareholder approvals with respect to
each party; (3) each party’s requirement to obtain required governmental and regulatory approvals required for the
proposed merger (and/or that such approvals may result in the imposition of burdensome or commercially undesirable
conditions, including required dispositions, that could adversely affect the combined company or the expected benefits of the
proposed merger); (4) an event, change or other circumstance that could give rise to the termination of the merger agreement;
(5) the failure to satisfy or waive a condition to closing of the proposed merger on a timely basis or at all; (6) a delay in
the timing to consummate the proposed merger; (7) the failure to integrate the parties’ businesses successfully; (8)
the failure to fully realize benefits, efficiencies and cost savings from the proposed merger or that such benefits,
efficiencies and cost savings may take longer to realize or be more costly to achieve than expected; (9) negative or adverse
impacts of the announcement of the proposed merger on the market price of American Water’s or Essential
Utilities’ common stock; (10) the risk of litigation, legal proceedings or other challenges related to the proposed
merger; (11) disruption from the proposed merger making it more difficult to maintain relationships with customers,
employees, contractors, suppliers, regulators, vendors, elected officials, governmental agencies, or other stakeholders; (12)
the diversion of each party’s management’s time and attention from ongoing business operations and opportunities
of such party on merger-related matters; (13) the challenging macroeconomic environment, including disruptions in the water
and wastewater utility industries; (14) the ability of each party to manage its respective existing operations and financing
arrangements on favorable terms or at all, including with respect to future capital expenditures and investments,
operations, and maintenance costs; (15) changes in environmental laws and regulations regarding each party’s respective
operations that may adversely impact such party’s businesses or increase the cost of operations; (16) changes in each
party’s key management and personnel; (17) changes in tax laws that could adversely affect beneficial tax treatment of
the proposed merger; (18) regulatory, legislative, local or municipal actions affecting the water and wastewater industries,
which could adversely affect the parties’ respective utility subsidiaries; and (19) other economic, business and other
factors, including inflation, interest rate fluctuations or tariffs. The foregoing factors should not be construed as
exhaustive. These forward-looking statements are qualified by, and should be read together with, the risks and uncertainties
set forth above and the risk factors included in American Water’s and Essential Utilities’ respective annual and
quarterly reports as filed with the SEC and in the definitive joint proxy statement/prospectus, as filed with the SEC on
December 31, 2025 (available at: https://www.sec.gov/Archives/edgar/data/1410636/000119312525337598/d15683d424b3.htm), and
readers should refer to such risks, uncertainties and risk factors in evaluating such forward-looking statements. Any
forward-looking statements speak only as of the date this communication is first used or given. Neither American Water nor
Essential Utilities has any obligation or intention to update or revise any forward-looking statement, whether as a result of
new information, future events, changed circumstances or otherwise, except as otherwise required by the federal securities
laws. New factors emerge from time to time, and it is not possible for American Water or Essential Utilities to predict all
such factors. Furthermore, it may not be possible to assess the impact of any such factor on American Water’s or
Essential Utilities’ businesses, viewed independently or together, or the extent to which any factor, or combination of
factors, may cause results to differ materially from those contained in any forward-looking statement.
Important Additional Information
about the Proposed Merger and Where to Find It
In connection with the proposed merger,
on December 17, 2025, American Water filed a registration statement on Form S-4 (Registration No. 333-292182) with the SEC, as
amended on December 29, 2025 (as amended, the “registration statement”). The registration statement, which was declared
effective by the SEC on December 30, 2025, includes a document that serves as a prospectus of American Water with respect to the
shares of American Water’s common stock to be issued in the proposed merger and a joint proxy statement of American Water
and Essential Utilities for their respective shareholders, and each party has filed and will file other documents regarding the
proposed merger with the SEC. Each party filed the definitive joint proxy statement/prospectus with the SEC on December 31, 2025
(available at: https://www.sec.gov/Archives/edgar/data/1410636/000119312525337598/d15683d424b3.htm) and commenced mailing of the
definitive joint proxy statement/prospectus to their respective shareholders on December 31, 2025. This communication is not a
substitute for the registration statement, the definitive joint proxy statement/prospectus or any other document that American
Water or Essential Utilities has filed or may file with the SEC or mail to their respective shareholders in connection with the
proposed merger. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS OF EACH PARTY ARE URGED TO
READ CAREFULLY AND IN THEIR ENTIRETY THE REGISTRATION STATEMENT, THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS, ANY AMENDMENTS
OR SUPPLEMENTS THERETO, AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC OR INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT
AND THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AS CURRENTLY AVAILABLE OR WHEN THEY BECOME AVAILABLE, BECAUSE THEY DO AND
WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders are able to obtain the registration statement, the definitive
joint proxy statement/prospectus and the other documents filed regarding the proposed merger free of charge from the SEC’s
website or from American Water or Essential Utilities. The documents filed by American Water with the SEC may be obtained free
of charge at American Water’s investor relations website at ir.amwater.com or at the SEC’s website at www.sec.gov.
The documents filed by Essential Utilities with the SEC may be obtained free of charge at Essential Utilities website at essential.co
or at the SEC’s website at www.sec.gov. The information included on, or accessible through, American Water’s or Essential
Utilities’ respective websites is not incorporated by reference into, and does not form a part of, this communication.
Participants in the Solicitation
American Water, Essential Utilities
and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies
from American Water’s and Essential Utilities’ respective shareholders in connection with the proposed merger. Information
about the directors and executive officers of American Water, including a description of their direct or indirect interests, by
security holdings or otherwise, is set forth in American Water’s definitive proxy statement for its 2025 Annual Meeting
of Shareholders, which was filed with the SEC on March 27, 2025, including under the headings “Compensation Discussion and
Analysis,” “Director Compensation” and “Equity Compensation Plan Information.” Information about
the directors and executive officers of Essential Utilities, including a description of their direct or indirect interests, by
security holdings or otherwise, is set forth in Essential Utilities’ definitive proxy statement for its 2025 Annual Meeting
of Shareholders, which was filed with the SEC on March 25, 2025, including under the headings “Director Compensation”
and “Compensation Discussion and Analysis.” Additional and superseding information regarding the respective directors
and executive officers of American Water and Essential Utilities and other participants in each respective proxy solicitation
and a description of their direct and indirect interests in the proposed merger, by security holdings or otherwise, is contained
in the registration statement and the definitive joint proxy statement/prospectus and other relevant materials filed or to be
filed with the SEC regarding the proposed merger, including in the definitive joint proxy statement/prospectus under the headings
“The Merger—Interests of Directors and Executive Officers in the Merger,” “Security Ownership of Certain
Beneficial Owners and Management of American Water” and “Security Ownership of Certain Beneficial Owners and Management
of Essential.” To the extent holdings of American Water’s common stock or Essential Utilities’ common stock
by the respective directors and executive officers thereof change from the amounts disclosed in the definitive joint proxy statement/prospectus,
such changes have been or will be reflected on Initial Statements of Beneficial Ownership of Securities on Form 3, Statements
of Changes in Beneficial Ownership on Form 4 or Annual Statements of Changes in Beneficial Ownership of Securities on Form 5,
in each case filed with the SEC. Investors and security holders should read the registration statement and the definitive joint
proxy statement/prospectus carefully before making any voting or investment decisions. Investors may obtain free copies of these
documents from American Water and Essential Utilities as indicated above.
No Offer or Solicitation
This communication is for informational
purposes and is not intended to, and shall not, constitute an offer to sell or the solicitation of an offer to buy any securities,
or a solicitation of any vote for approval, nor shall there be any offer or sale of securities or solicitation of any vote or
approval in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as amended.
