THE company which supplies water to hundreds of thousands of homes across Hampshire is up for sale.

Utility firm Southern Water is on the market for £4 billion in a move which could spark a round of consolidation in the sector, it has been reported.

The company - which supplies water to one million customers in Kent, Sussex and Hampshire - has been put on the market by its current owner, the Royal Bank of Scotland's private equity division.

RBS, which owns 49 per cent of Southern Water under a complex ownership structure, has appointed Deutsche Bank to oversee the sale.

Infrastructure funds are expected to be among the potential buyers, attracted by the firm's assets and steady cashflows. Southern has around 2,000 staff and estimated assets of £2.9 billion.

It also made pre-tax profits of £61.4 million in the year to March 31, 2006.

Takeover speculation in the sector has reached fever pitch in recent months, with South West Water owner and rumoured bid target Pennon saying last week that it could not explain recent rises in its share price.

But the Competition Commission's recent decision to approve the merger of mid Kent Water and South East Water has also given hope for similar deals in the future.

News of the Southern Water sale comes in a week where the corporate spotlight will be firmly on the utility sector.

Two of the most commonly cited takeover targets, Northumbrian Water and Yorkshire Water owner Kelda, both report results during the week, alongside Severn Trent and the North West-based United Utilities.

Deutsche Bank was unavailable for comment although an RBS spokesman said: "Our ownership of Southern Water is under review as part of the normal course of business."

As well as supplying South East England with fresh water, the firm also recycles dirty water from around two million homes.