Anglian Water mainly serves homes in the east of England

AWG has recommended a 1555 pence per share bid, although several other unnamed parties have also expressed interest in the business.

The Osprey consortium includes the Commonwealth Bank of Australia, Industry Funds Management and Canada's Pension Plan Investment Board.

AWG employs 9,000 staff across the UK and has about six million customers.

'First-class service'

News of the bid from Osprey Acquisitions and the possibility of other offers sent AWG's shares up more than 4% to 1618 pence.

AWG said it would consider any other bids should they materialise, but warned that this may not happen and, for the time being, it was recommending the Osprey deal.

We are long-term investors Osprey Acquisitions Check AWG shares

Should the deal be approved by AWG shareholders, Osprey said its focus would be on delivering a "first-class service" to Anglian customers.

"We are long-term investors," an Osprey spokesman said.

"We are looking forward to supporting management's strategy of concentrating on delivering first-class service to customers and on its regulatory obligations, while seeking further operating and capital expenditure efficiencies."

'Attractive'

AWG said the offer was an "attractive opportunity" for its investors.

"AWG's management has transformed the company and delivered a sustained improvement in performance for both shareholders and customers," said chairman Peter Hickson.

"The board of AWG has considered the offer very carefully and unanimously recommends it to shareholders."

Industry Funds Management is a specialist financial firm which invests in utility and infrastructure assets such as water companies.

Water companies are desirable businesses for investors

The Canadian Pension Plan Investment Board was set up in 1997 to invest surplus assets from Canada's state pension scheme.

Separately, Australian finance firms Hastings Diversified Utilities Fund and Utilities Trust of Australia - subsidiaries of the Westpac Banking Corporation - are to buy South East Water for �665.4m.

The deal must be approved by the Competition Commission since the Australian firms already own 50% of Mid Kent Water.

Although they are highly regulated, water companies are considered desirable investments because of their stable cash flows.

Thames Water, which has been put up for sale by its German owner RWE, is expected by analysts to fetch up to �7bn.