KKR & Co. withdrew its bid to invest £4 billion ($5.4 billion) in Thames Water when the US infrastructure giant realized there was little upside to a deal, according to people familiar with the deliberations.

The water company said the decision not to proceed with the equity raise created uncertainty around its plan to stay afloat, raising the prospect of nationalization.

Henry Kravis, one of KKR's co-founders, held talks with a senior Downing Street official at the weekend as a £4bn bailout of Thames Water hung in the balance, Sky News learns.