Severn Trent is reportedly being eyed up by a group of private equity firms aiming for a £5 billion takeover of the water company.

Thought to include US firms KKR and Apollo Management, the private equity group wishes to acquire Severn Trent before it completes its planned public offering of its highly profitable Biffa waste business.

Severn Trent has a stock market value of £4.4 billion and serves eight million customers in three million households and businesses from mid-Wales and the Bristol Channel to the Humber Estuary. The report said bankers believe if the bid were successful, the private equity firms would retain Biffa and sell the core water company to one of the many infrastructure players circling the water sector.

The speculation on Severn Trent comes as the sale of Thames Water by German utility RWE begins.

KKR and Apollo are thought to have turned their attention to Severn Trent after dropping out of the auction of Thames Water.