Vivendi Environnement, an arm of the debt-laden French giant, is attempting to take over the company in a deal valuing Southern Water at £2.05bn ($3.11bn).

The European Commission said it had cleared the acquisition under its new, simplified merger procedure.

But the deal still needs approval from UK watchdog Ofwat.

Growing business

Southern Water is being sold by First Aqua - the holding company which bought Southern Water from energy firm Scottish Power in March.

The deal would give the French firm a 10% share of the water market in England and Wales.

Vivendi Environnement, which also owns the Connex transport group, currently has a small presence in the UK water sector through the supply businesses Three Valleys Water, Folkestone and Dover Water, and Tendring Hundred Water Services.

Southern Water, which supplies 1 million homes in south-east England, was put up for sale last year as part of Scottish Power's decision to focus on the energy sector.

Big debts

Scottish Power bought Southern Water in 1996 but the company became less attractive because of strict controls on charges.

Vivendi had expressed interest at the time of the sale, and the deal with First Aqua had been widely expected.

Vivendi Environnement's parent company Vivendi Universal is currently struggling with enormous debts.

Last week it reported heavy losses for the first half of this year and failed to secure a vital 3bn euro loan.