In a deal which values the firm at £4.2bn JP Morgan teamed up with an Australian infrastructure fund called Challenger and other parties to buy the utility company supplying water to Sussex and Kent from Royal Bank of Scotland.
Southern Water is the seventh largest water and sewage company in England and Wales. It provides fresh water to more than two million people in the South East.
It will see the J.P. Morgan take a 32% stake in Southern Water, with Challenger Infrastructure paying for a 27% shareholding.
The other investors in the consortium include seven Australian pension funds.
Southern Water had the highest growth profile in the sector and the new owners have promised to support the company's £1.6bn investment programme for its current regulatory period that runs until 2010.
The purchase comes as the market for mergers has practically dried up. Banks are no longer willing to lend as freely or as cheaply to help finance takeovers in the wake of the US housing slump and higher borrowing costs. However, there is a growing interest in utility companies because of their steady cash flow.
They are considered particularly attractive investments when uncertainty over economic growth is high
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