SOUTHERN Water, the water supplier and sewage disposal business serving two million customers in Kent, Sussex and Hampshire, has been sold in a £4.2 billion deal.

The Royal Bank of Scotland’s private-equity division sold the utility to a group led by J P Morgan Asset Management.

Goldman Sachs had been the hot favourite to land the Worthing-based business, which has a large operation in Capstone Road, Chatham, but was trumped by the J P Morgan consortium that includes Australia’s Challenger Infrastructure Fund.

The price RBS obtained is around double what it paid for Southern Water four years ago.

The decision to sell followed a massive shakeup at Southern Water involving a rush of disposals and scores of staff transferred to contractors as part of what the firm dubbed "assets reorganisation."

Since then, the company has sold Bewl Water to Simon Hume-Kendall, the owner of the Hop Farm Country Park, and outsourced IT services to India. Design and engineering services have gone to W S Atkins.

The sale will affect around 2,000 staff, including those in Chatham.

Southern Water claimed it was business as usual.

It is the latest in a spate of recent sales involving water companies. German ?Group RWE sold Thames Water to Australia’s Macquarie for £8bn, while Macquarie sold South East Water to Utilities Trust of Australia.