Water firm AWG said on Monday it has agreed a 2.2 billion pound takeover offer from Osprey, an investment group including Canadian, Australian and British firms.

The investment group comprising Canada Pension Investment Board, Colonial First State Global Asset Management, an asset management division of Commonwealth Bank of Australia, Industry Funds Management and 3i Group said it was offering 1,555 pence per AWG share in cash.

The offer represents a premium of 14.2 percent to AWG's closing share price on September 13, the last business day before AWG announced it had received an approach that may or may not lead to an offer and a 0.6 percent premium to Friday's close of 1,545p.

The board of AWG has considered the offer ... very carefully and unanimously recommends it to shareholders, AWG, which supplies water and sewerage services in the East Anglia region of eastern England an area with a population of about 5.5 million, said in a statement.

Canada Pension Investment Board and Colonial First State Global Asset Management each own 32.3 percent of the consortium while Industry Funds Management has 19.4 percent and 3i controls 16.1 percent.

We are long term investors and 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, the consortium said.

The offer values AWG shares at 25.3 times current financial year earnings, sharply higher than the UK water and utilities average of 13.6, according to Reuters Estimates.

UK regulations make it very difficult for companies that already own water assets to buy another water company, leaving the door open for financial investors attracted by water firms' stable cash flow.

Hastings Funds Management Ltd, a unit of Australia's Westpac Banking Corp. said on Monday they had bought British water utility South East Water for an implied enterprise value of 665.4 million pounds.

Several financial investors are also competing for Thames Water, which provides water and sewerage services in London and is being sold by German utility RWE AG for about 7 billion pounds.

Terra Firma Capital Partners, a consortium of UBS and the Qatar government, and another being formed by Australia's Macquarie Bank Ltd are set to submit second round bids for Thames on October 10, sources familiar with the matter told Reuters in September.

Morgan Stanley and Dresdner Kleinwort are joint financial advisers to AWG and Lexicon Partners advised Osprey.

AWG, which in May reported full year profit more than trebled thanks to larger bills for its customers, said last week its Anglian Water arm had performed materially above its expectations in the first half and its non regulated businesses performed as expected.

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