BANGALORE - SouthWest Water Co said it agreed to be acquired by institutional investors led by J.P. Morgan Asset Management and Water Asset Management LLC for about $275 million in cash, taking the water utility private.

Los Angeles-based SouthWest, which operates and maintains water and wastewater infrastructure, said the investors are offering $11 a share, representing a 56 percent premium to the stock's closing price on Tuesday.

Including the assumption of debt, the deal has an enterprise value of about $427 million, it said.

Shares of the company were up $3.43 at $10.50 IN morning trade Wednesday on Nasdaq. They touched a year high of $10.67.

We believe the partnership that is acquiring them is taking a long-term view on the asset valuation, said Debra Coy, analyst with Janney Montgomery Scott.

JP Morgan Asset Management is the investment arm of JPMorgan Chase and has about $1.5 trillion assets under supervision.

Water Asset Management, the third largest shareholder of SouthWest, is a water industry focused investment firm.

The offer also calls for a near-term cash injection of $16 million prior to the closing of the transaction. SouthWest will issue 2.7 million shares at $6.00 per share in a private placement.

The deal represents 11.4 multiple on the company's 2010 EBITDA, according to analyst Coy's estimates.

I presume the valuation is partly predicated on the potential for earnings improvement over several years, said Coy, who downgraded the stock to sell from buy on valuation.

She doesn't expect a higher offer -- either from a financial buyer or another utility -- as it would be difficult to better the offer price.

M&A between publicly traded utilities has been quite lately. I don't think that will change, Coy said.

Other publicly-traded water utilities include American Water Works, American States Water Co and California Water Service Group.

The transaction could take up to a year to close due to the requirement for state utility commission approvals, analyst Coy said.

Wells Fargo Securities LLC acted as financial advisor to SouthWest's special board committee in exploring strategic alternatives, while Macquarie Capital (USA) Inc acted as financial advisor to the investors. (Reporting by A.Ananthalakshmi; Editing by Gopakumar Warrier)