L&G to sell Cala Homes to buyouts for £1.35bn
Unlock Digest Editor for free
FT Editor Roula Khalaf picks her favourite stories in this weekly newsletter.
Legal & General has agreed to sell Cala Homes to investment groups Sixth Street Partners and Patron Capital for more than £1bn as part of plans to streamline and focus on core operations.
The FTSE 100 financial group said it had reached an agreement to sell the housebuilding business – which sold around 3,000 homes last year – for an enterprise value of £1.35bn and would receive £1.16bn in cash. Patron previously owned Cala with L&G but sold it in 2018 at an equity valuation of £605m.
L&G chief executive António Simões told the Financial Times that the deal was “a testament” to his group’s turnaround and was supported by an improving housing market.
“There is good momentum, interest rates are supportive, so the market is buoyant,” Simões said. “From private equity and strategic buyers, we are seeing a lot of interest in this process.”
Simões took over the group in January, replacing Sir Nigel Wilson, who spent more than a decade reshaping the insurer according to his vision of “inclusive capitalism”, building housing, science parks and other infrastructure that could be distributed to the company’s asset management funds or used to match pension liabilities.
The deal is the latest major transaction involving a UK housebuilder, as developers weather a severe downturn caused by rising mortgage rates and look ahead to a market recovery as interest rates begin to fall.
This year, Barratt took over Redrow, while Bellway made an unsuccessful bid to buy Crest Nicholson.
Sixth Street and Patron’s bid beat out a bid from Persimmon, a FTSE 100 housebuilder, according to people familiar with the matter.
US-based Sixth Street, with more than $80 billion in assets under management and committed capital, invests across a range of sectors including real estate. Co-chief investment officer Julian Salisbury said Sixth Street looks forward to “continuing to support Cala and its management team, not only with capital but also with the significant resources of our London-based real estate investment team.”
Cala, a 150-year-old company focused on the south of England, the Cotswolds and Scotland, has increased its home sales from around 1,700 in 2017 to 2,917 last year. Last year, the company generated revenues of £1.3bn and pre-tax profits of £112m.
Because L>he sale is the first major step in a strategy outlined by Simões at an investor day in June to make the group “simpler” and have a clearer investment case.
The company said it would receive £500m when the deal closes, likely before the end of the year, and the remaining amount over five years — money it would reinvest in its wider operations, as well as support future returns to shareholders. The group, which announced a £200m buyback at its investor day in June, plans to rely more heavily on such buybacks.
The company paid more than £315m to buy Patron’s majority stake in the housebuilder in 2018.
L&G shares fell more than 2 percent mid-morning in London, a steeper decline than the UK’s blue-chip stock index, as some analysts highlighted the delayed payout.
Simões said the successful bid provided the “best combination of valuation and certainty” for the company and showed it was “maintaining momentum” under its new strategy.
