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L&G sells house builder in wake of declining profits
Legal & General (L&G) has announced the sale of house builder Cala Homes for more than £1bn, six months after the firm reported falling profits.
In March, Cala revealed that pre-tax profits had declined by a third, which it blamed on high interest rates, mortgage rates and inflation “affecting homebuyer confidence”.
It turned a pre-tax profit of £112m in 2023, down 33.6% on the previous year’s figure of £169m. Revenue fell 7.3% to £1.25bn.
Reports at the time said L&G was looking to offload the company.
Now, the insurance giant has said it is selling Cala to Ferguson Bidco, an entity owned by funds managed by global investment firm Sixth Street Partners and real estate fund Patron Capital.
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L&G said the sale, expected to complete in Q4 of 2024, is for an enterprise value of £1.35bn and will generate cash proceeds of £1.16bn after adjustment for net debt.
Around £500m will be paid at closing of the deal, with the remainder paid over five years on a deferred non-contingent basis, a statement from L&G said.
Cala, which has delivered housing across the South of England and in Scotland, said it was “on track” to complete circa 3,000 new homes in the financial year ending 31 December 2024.
The figure is similar to the yearly total reported in March – 2,917, which at the time represented a 3.6% annual decline.
Announcing the sale, António Simões, group chief executive officer of L&G, said the transaction “demonstrates continued momentum in executing our strategy, simplifying our portfolio to enable a sharper focus on our core, synergistic businesses”.
He added: “Cala has been an important part of L&G for over a decade, with profits increasing tenfold since our initial investment in 2013.”
Mr Simões said the sale would provide capital to deliver L&G’s strategic goals of sustainable growth alongside enhanced returns for shareholders.
Kevin Whitaker, chief executive of Cala, said the sale was “excellent news” for the company.
“The acquisition by Sixth Street Partners and Patron Capital demonstrates confidence in Cala’s business plan and growth potential, as our talented team continues to build high quality, sustainable new homes throughout the UK,” he added.
“L&G has been a great support to Cala throughout its investment and ownership,” Mr Whitaker said.
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