SOUTH EAST WATER, the utility group, was yesterday acquired by its management team for £426 million in a deal backed by an Australian investment bank.

The buyout, led by Margaret Devlin, managing director of South East Water, was funded by Macquarie Bank, an Australian investment firm keen to build a UK presence in infrastructure businesses such as water, toll roads and airports.

The purchase price includes a cash payment of £386 million and the assumption of £40 million of debt already in South East Water, which supplies 1.5 million customers from Maidenhead to Eastbourne. The company is heavily involved in riverside protection and water conservation projects, including the Holywell Rock Revetment Project.

Macquarie, which pulled out of advanced discussions to buy Mid Kent Water from German investment bank WestLB earlier this year, outbid at least four other competitors for South East Water, which was advised by NM Rothschild.

The water utility also received bids from CVC Capital Partners, the private equity firm at the heart of the Debenhams bidding battle, and UBS, the Swiss bank.

Star Capital Partners, the US private equity firm which unsuccessfully stalked the owner of Anglian Water, bid, as did Asian utility group CKI Holdings.

South East Water is owned by Saur, the utilities arm of French group Bouygues. The company reported a pre-tax profit of £20.4 million for the year ended March 31, 2003.

Macquarie Bank has just begun raising funds for a new European investment fund and is hoping to raise between €500 million (£350 million) and €1 billion.

The fund is understood to be in takeover discussions with a range of infrastructure companies.