L&G builds case for Cala takeover

By Mark Kleinman, City Editor
Legal & General (L&G) is in talks to buy out its fellow shareholder in Cala Group following several aborted efforts to auction the Scottish-based housebuilder.
Sky News has learned that L&G is in advanced negotiations about acquiring a roughly 47.5% stake in Cala from Patron Capital, a property investor.
The talks, which are expected to value Cala at more than €500m, could be completed in the next few weeks, according to insiders.If successfully concluded, the FTSE-100 insurance and pensions provider L&G would add Cala to a portfolio of subsidiary businesses which are trying to address some of Britain's biggest economic quandaries.This week, Theresa May, the Prime Minister, ordered housing developers to stop hoarding land and get on with building new homes amid a continuing squeeze on new housing supply.L&G is likely to be asked about its intentions towards Cala when it reports full-year results on Wednesday.Cala was taken over by L&G and Patron in 2013, with its management team holding a small stake in the company.Lazard, the investment bank, has conducted several rounds of talks with prospective buyers in the last 18 months, including with Evergrande, a Chinese property group.Cala, which describes itself as Britain's most upmarket housebuilder of scale, said in January that it was on course to notch up a sixth consecutive year of record sales and profits.
A number of privately held companies in the sector are seeking to take advantage of measures aimed at meeting a Government target of building one million new homes by 2020.L&G and Patron took control of Cala in a deal valuing the company at €210m, and it has made one substantial acquisition since then.They have considered a stock market flotation of the company, and that could remain an option for L&G to exit the business in the longer term.Cala's operations are concentrated outside London and the South East, and focused on areas in the Home Counties, Cotswolds, and around Aberdeen, Edinburgh and Glasgow.Alan Brown, Cala's chief executive, said the results reflected strong momentum in the business but has warned about the deliverability of the Government's housebuilding target.
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"Following the General Election result, we now have a Conservative government with a stated manifesto pledge to build one million new homes by 2020," he said last year.Cala, L&G and Patron all declined to comment on Tuesday.
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