THE UK's largest electricity supplier, Innogy, which took over Northern Electric's domestic supply business, is being bought by German energy firm RWE for £3.1bn.

The move, widely expected in the City, comes a month after the Swindon firm revealed it was in talks with a third party.

Innogy supplies 4.7 million homes with electricity and 1.9 million gas customers through its npower brand.

Innogy took over Northern's domestic supply business in September last year. It also owns Yorkshire Power.

The deal means more than half the UK power industry will be owned by foreign companies.

Another German company, Eon, is expected to complete its £6.2bn takeover of Powergen next month.

RWE, which owns Thames Water, is paying 275p a share for Innogy and is also taking on the company's net debt of £2.1bn. It means the total enterprise value of the deal is £5.2bn.

Innogy was created in 2000 when the former National Power split its domestic and international operations.

Innogy's chief executive, Dr Brian Count, said the takeover marked the culmination of the management team's efforts over the past three years. He said: "The new combination will present further opportunities to enhance our leading position in the UK and to share skills with the RWE group.

"I look forward to leading Innogy on the next stage of development with RWE."

RWE said it planned to combine its existing UK energy and supply operations with Innogy's business.

Dr Count is to carry on as chief executive of Innogy, and RWE said the group's headquarters would remain in Swindon.

RWE chief executive Dr Dietmar Kuhnt said he was "extremely pleased" to have reached an agreement with Innogy.

"Innogy is an outstanding business with a strong management team and this combination will deliver significant benefits to both RWE shareholders and Innogy customers alike," he said.

The 275p-per-share offer represents a 31 per cent premium to Innogy's closing share price on February 15, the day before it announced it was in bid talks. The deal needs to be approved by shareholders and the regulatory authorities before it can be completed.

The UK group employs about 8,000 staff, with 800 based in Swindon. It also operates eight power stations.

RWE employs 7,000 staff at Thames Water but Dr Count said: "I doubt there are going to be many job losses. The whole premise is not to cost cut but create value and growth."