Anglian Water's parent group rejected a �970m offer

The bank was backing buyout team Bream Investments and had first approached AWG - the owner of Anglian Water - in January with an informal offer.

After a second informal approach, which valued AWG at about �970m, was rejected the Takeover Panel gave WestLB and Bream a deadline of 18 June to come up with a formal bid.

While WestLB has decided not to pursue its interest in the firm, Bream said it was still in "active discussions" with other funding sources.

Bream added it would make a further announcement on or before 18 June.

Investigation

WestLB said that while it was willing to support a bid by Bream at the previously indicated price "in the absence of a recommendation from AWG... or access to further information which would support an increased price" it had decided to withdraw its offer of funding.

However, there has been speculation that the investigation of WestLB's principal finance arm by the German financial regulator may have contributed to the bank's withdrawal.

AWG said it had always made it clear to WestLB that it was willing to discuss a possible offer for the firm.

"There were discussions between the respective advisers but WestLB failed to propose a price which the board was prepared to recommend to shareholders," AWG said.

WestLB was facing a possible problem in backing a bid for AWG as it already owns a majority stake in Mid Kent Water.

Any bid for AWG is likely to have triggered an investigation by the Competition Commission.

As well as owning Anglian Water, AWG also has infrastructure support businesses that operate in the telecoms, gas and water sectors.