(Bermuda) Ltd. for $3.1 million.

The plan to combine the two companies operations results in a "transformation from a basic water utility to a diversified water company'', said Watlington Waterworks vice president Mr. Allan Rance.

"Watlington Waterworks' management believe that the transaction should significantly improve the company's profitability and cash flow and pave the way for expansion both inside Bermuda and into the Caribbean,'' he said.

"We see this as an opportunity to move forward at a lot faster pace than we had planned,'' said Pure Water president Mr. Allan Marshall, 60 percent owner of Pure Water.

Pure Water vice president, operations, Mr. Paul Claude, owns the remaining 40 percent of the company.

Upon completion of the deal, anticipated in January, the duo will hold about 19 percent of Watlington Waterwork's shares.

Last week, Watlington Waterworks' board gave in principle approval to the plan.

The $3.1 million consideration is in the form of $664,000 in cash, 220,000 common shares of Watlington Waterworks priced at $5 each, and settlement of obligations worth $1,336,000, said Mr. Rance.

The additional 220,000 common shares will bring the total Watlington Waterworks shares outstanding to 1,138,000 and would greatly improve the liquidity of the company, said Mr. Rance.

Mr. Marshall and Mr. Claude will continue to manage Pure Water, which will operate as a separate subsidiary of the water utility.

The strategic acquisition of Pure Water is the first step in a restructuring of Watlington Waterworks which was conceived by the Bank of Butterfield's corporate finance group.

The Bank of Butterfield, working with each company on their separate strategic plans, identified the possible combination and contacted both entities about a possible union, Bank of Butterfield manager, capital markets, Mr. Bruce Sharpe said.

The bank arranged and structured the transaction and proposed a new corporate structure to include a new holding company and two operating subsidiaries, Watlington Waterworks and Pure Water.

A new holding company, not yet named, will own all the property as well as the operating companies responsible for the utility, bottled water, water treatment and retail business.

Watlington Waterworks shareholders will exchange their shares for shares in the new holding company.

Watlington Waterworks, incorporated over 60 years ago, supplies potable water across the Island to hotels, businesses and residential customers and earlier this year opened a $3.7 million reverse osmosis plant on North Shore Road.

Pure Water sells bottled, distilled water and water treatment systems such as reverse osmosis units for water filtration products to commercial and residential customers.

Plans are in the works to move the operations of Pure Water to the Watlington Waterworks site.

Pure Water, which commenced operations three years and three months ago, sells, on average, 8,000 to 10,000 gallons of water per week.

"Watlington Waterworks management believe that after due and careful analysis of current forecasts, the acquisition of Pure Water should create significant value for Watlington Waterworks shareholders.

"Watlington Waterworks should experience no dilution in their 1996 earnings per share,'' Mr. Rance said. "In fact, the company's 1996 earnings per share should increase significantly as a result of the transaction.'' Trading of Watlington Waterworks on the Bermuda Stock Exchange was suspended yesterday prior to the announcement.

Trading was anticipated to resume today.

Watlington Waterworks last traded October 19, down 12.5 cents at $4.875, on volume of 17,147.

High for the year is $5. The stock has historically been lightly traded.

manager, capital markets, Mr. Bruce Sharpe, Watlington Waterworks vice president Mr. Allan Rance and Pure Water president Mr. Allan Marshall and vice president Mr. Paul Claude.