Allianz-backed consortium to buy Britain's Affinity Water

May 2 (Reuters) - A three-member consortium that includes German insurer Allianz (Swiss: ALV-EUR.SW - news) has agreed to buy Affinity Water Ltd, the largest water-only supply firm in England and Wales by revenue, through two transactions, the group said on Tuesday.

The consortium, which also includes London-listed HICL and fund manager DIF, will acquire a 90 percent stake from Morgan Stanley (Xetra: 885836 - news) 's infrastructure team and M&G (Shanghai: 603899.SS - news) Investments-owned Infracapital for 687 million pounds ($884 million), the selling shareholders said.

It will also acquire the remaining 10 percent stake from French water and waste firm Veolia, with both transactions expected to complete in May 2017.

"Affinity has made significant progress across all areas of the business over the last five years under our ownership ... We are confident that Affinity will continue to flourish under its new owners," Infracapital co-founder Ed Clarke said in a statement.

The deal is the latest high-profile acquisition of British infrastructure by overseas investors, as pension schemes, sovereign wealth funds and others look to tap into stable returns that are often hard to find in other financial markets.

Last month, a consortium of Canadian and Kuwaiti investors agreed to buy a minority stake in Thames Water, Britain's largest water firm, from funds managed by Macquarie.

Morgan Stanley and Infracapital formed Affinity Water through the purchase of Veolia Water's UK water supply operations in June 2012.

The company today supplies water to 1.5 million homes and businesses and maintains water supply infrastructure. It had a regulatory capital value - a key industry metric - of 1.156 billion pounds as of March 31.

Affinity Water said separately it did not expect the sale to result in any operational changes.

British infrastructure investment firm HICL said it would hold a 36.6 percent equity interest in Affinity Water after the deal closes, for which it would pay 269 million pounds. ($1 = 0.7768 pounds) (Reporting by Esha Vaish in Bengaluru; Editing by Mark Potter)