updated 11/12/2010 9:38:11 AM ET 2010-11-12T14:38:11

The New Jersey city of Nashua has reached a deal to buy water distributor Pennichuck Corp. for $138 million in cash, ending a long-running dispute.

The city will buy Pennichuck's outstanding common stock for $29 per share in a deal that is subject to a vote of the Board of Aldermen and approval of the New Hampshire Public Utilities Commission, the company said in a statement issued Friday.

Shares of Pennichuck closed Thursday at $24.40.

Pennichuck said it may take until the second half of next year for the review process, and city approval to take place. Both sides reached the agreement on Thursday, settling the city's efforts to take the Pennichuck Water Works by eminent domain that included years of litigation.

Pennichuck can continue to pay regular quarterly dividends until the sale closes. Dividends will be no greater than the annual rate of 74 cents per share, the company said. Pennichuck has suspended its dividend reinvestment plan, the statement said.

Holders of two-thirds of the company's stock also must vote in favor of the deal for it to go through, and it is subject to the city's ability to get financing. Nashua expects to issue general obligation bonds for the purchase, Pennichuck said.

"I am also particularly pleased that we have been able to resolve this dispute in a manner that will allow our workforce to continue providing exceptional service to the customers and communities we serve," Pennichuck CEO Duane Montopoli said in the statement.

Pennichuck said the company and city have reached agreement to drop the eminent domain proceedings even if the acquisition ultimately is not completed.

In 2008, the state Public Utilities Commission approved plans by the city to take over Pennichuck Water Works by eminent domain.

Regulators fixed the price for the acquisition at $203 million. The decision ended more than four years of litigation.

Pennichuck Water Works is the state's largest water utility with about 25,000 customers.

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