Kelda, owner of Yorkshire Water, today agreed to be acquired by a Citigroup-led consortium for £3 billion.

The UK’s third largest water company has decided to go ahead with the takeover after the deal emerged last week. Shares in Kelda rose 3.41 per cent to £10.91, just above the £10.90 per share all-cash deal Citigroup, GIC Special Investments and HSBC have offered the business.

The consortium is also proposing that shareholders retain any proposed interim dividend in respect of the first half of the year.

Yorkshire Water is the latest water company to attract attention from infrastructure funds, who are keen to find long-term stable cash-generating assets in which to invest. The funds are attracted by the industry's low-risk nature, its stable cash flow and its generous dividend policies.

Last month, Royal Bank of Scotland sold Southern Water to a consortium led by Australia's Challenger Infrastructure Fund and JPMorgan Asset Management for £4.2 billion, a 30 per cent premium to its regulated asset value.

Tiny South Staffordshire water was also sold for £400 million by Arcapita, the Bahrain-based investment group, to Alinda, a US infrastructure fund.

Infrastructure fund and pension fund investors' appetite for water assets appears to have been undiminished by the credit squeeze and further deals in the sector have been tipped, with analysts speculating that Kelda and Northumbrian Water were the most likely targets.

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