Insurer Legal & General (L&G) has partnered with European private equity group Patron Capital to buy Lloyds-owned Cala Homes in a deal worth £210m. The investment groups plan to acquire 46.5% equity stakes in Cala from Lloyds Banking Group, with Cala’s management lapping up the remaining 7% share. Lloyds took control of Cala following a debt-for-equity swap at the end of 2009. The acquisition will be financed by £140m of equity and £70m of debt, with both L&G and Patron having a representative on Cala’s board.
The Cala Homes deal is Legal & General’s first direct investment in the housebuilding sector. Cala focuses on prime property in Scotland, the Midlands and the South East of England. The company has almost 10,000 land plots worth £3bn in its portfolio, 92pc of which it says were unaffected by the housing market downturn. The company made a pre-tax profit of £11.4m last year, and has gross assets of £354m. Many British housebuilders, including Cala, Persimmon and Taylor Wimpey have enjoyed rising profit margins from land purchased cheaply during the housing crash.
Earlier this month Legal & General said it would accelerate its direct investments in business ventures, property and infrastructure to gain higher returns to fund its long-term liabilities. The news of Legal & General’s acquisition of Cala Homes stake comes two days ahead of the UK Budget, in which chancellor George Osborne is expected to outline plans to extend a government support programme for mortgages as part of measures to boost housebuilding and help people get a foot on the housing ladder.