Li Ka-shing makes bid approach to Northumbrian

Hong Kong tycoon Li Ka-shing arrives at a news conference in Hong Kong August 5, 2010.

LONDON (Reuters) - A group owned by Li Ka-shing, Hong Kong's richest man, has made a takeover approach to Northumbrian Water, a well-signalled move analysts have said could value the utility at up to 2.6 billion pounds.

Northumbrian said Friday it had been approached by Cheung Kong Infrastructure Holdings, which itself said earlier this week it might make an offer.

Northumbrian shares, which had risen 9 percent since CKI's announcement, were up 0.6 percent at 418 pence in early trading, valuing the company at 2.2 billion pounds.

The company would not comment on the value of CKI's proposal. Analysts have said CKI could end up paying 450-500 pence per share.

A rise in inflation this year, from which British water utilities are shielded through regulated returns, has increased the appeal of such companies to infrastructure investors seeking the safety of predictable, long-term cash flows.

Northumbrian shares have often risen on speculation its largest shareholder, Ontario Teachers' Pension Plan with a 27 percent stake, could make an offer.

Britain, open to foreign ownership of infrastructure assets, has proved a popular investment destination for the octogenarian Li, who has bought into regulated utility assets in the past.

CKI has already invested in two unlisted British water companies. It owns Cambridge Water and has a 4.75 percent stake in Southern Water, according to CKI's website.

(Reporting by Adveith Nair; Editing by Dan Lalor)