Vivendi Environnement to buy Southern Water

PARIS, May 7 (Reuters) - Vivendi Environnement said on Tuesday it had agreed to acquire UK water company Southern Water from First Aqua, a deal that could give the French utility a 10 percent share in the water market in England and Wales.

Vivendi Environnement, a unit of media giant Vivendi Universal, said it planned to make the acquisition, already flagged in March, through its Vivendi Water UK subsidiary, which stands to invest up to 680 million euros ($623.9 million).

Under terms still being hammered out, independent financial partners would stump up the rest of the purchase price for Southern Water, whose 2.058 billion pound ($3.02 billion) enterprise value under the deal is equivalent to its valuation when First Aqua bought the division from Britain's Scottish Power last month.

"We are looking at consolidating 100 percent of Southern Water, but it's too early to say exactly what proportion of shares or voting rights we will own,'' a spokeswoman for Vivendi Environnment said.

"The non-recourse financing that we are discussing has yet to be signed, and so the deal still hinges on getting that funding and on the green light from the EU and British competition authorities,'' she added.

Vivendi Environnement's Vivendi Water UK subsidiary plans to make the purchase by buying a holding vehicle, First Acqua JVCo Ltd, which owns 100 percent of Southern Water.

With the English and Welsh water market estimated at around 10 billion euros, Vivendi Environnement said the operation should boost its share value and lift earnings per share in the first year after the acquisition.

Shares in Vivendi Environnment, which have underperformed peers in recent sessions amid uncertainty over parent Vivendi Universal's commitment to keeping the unit, were flat at 0913 GMT, standing at Monday's close or 36.50 euros in a weaker Paris market.

Vivendi Environnement said its advisors on the deal, which should be closed during the fourth quarter of this year, were Lazard and Schroder Salomon Smith Barney.