NORTHUMBRIAN Water seems set to be merged with a south-east rival if a Chinese tycoon's mooted takeover goes ahead.

It also emerged last night that if a firm bid is made by Hong Kong billionaire Li Ka-shing the deal, expected to be worth £2bn, will automatically be referred to the Competition Commission.

Regulator Ofwat's rules bar any individual or firm from owning more than one independent water company.

To buy Northumbrian Water Mr Ka-shing's Cheung Kong Infrastructure Holdings(CKI) would have to either sell Cambridge Water, which it already owns, or merge the two firms.

Under merger rules any bid by CKI to join the two companies will automatically be referred to the Competition Commission.

Northumbrian Water confirmed on Friday that it had received a takeover approach from CKI, which also has a 4.75 per cent stake in Southern Water.

The Durham City based utility firm said it was an indicative proposal at this stage and "There can be no certainty that an offer will be made."

Although Cambridge Water is a relative minnow compared to Northumbrian Water Durham City's MP last night expressed fears that a merger could potentially lead to job cuts, as some roles could be duplicated.

Roberta Blackman-Woods said: "My main concern is that a take-over may lead to the merging of resources and I am particularly concerned about the impact this may have on the future of vital local jobs.

"Northumbrian Water is the largest private sector employer in my constituency and it is essential that this investment in the region is maintained."

The County Durham firm is no stranger to mergers, also operating Essex & Suffolk Water, which it joined with in 2000, under the Northumbrian Water Group umbrella.

Northumbrian Water employs 936 at its head office in Pity Me and 2,884 in total, as well as supplying 4.4m UK customers.

In comparison Cambridge Water directly employs 110 staff and services around 125,000 households in the Cambridgeshire area. Its household customers have the second lowest bills in England and Wales.

Last night Ofwat would not comment on any individual organisations but outlined its policies which cover all water firms.

A spokesman said: "Any water company or the owner of the water company cannot own more than one.

"Subject to fit and proper tests, organisations can acquire a company. "However, mergers are referred automatically to the Competition Commission, in cases where either company has an annual turnover in excess of £10m."

The spokesman said that Ofwat would be expected to provide evidence to the Competition Commission, although the commission would make the final decision on whether a merger could go ahead.

"Key criteria on mergers for us includes whether a merger would be to the detriment of our ability to regulate comparatively, and still be able to protect consumers," the spokesman added.

Eighty-three year old self-made billionaire Mr Ka-shing, is known in Hong Kong as Superman because of the business prowess that has made him the world's 11th richest person, with an estimated personal fortune of $26bn.