(Bloomberg) -- British financial-services firm Legal & General Group Plc agreed to sell homebuilder Cala Group to alternative-asset managers Sixth Street Partners and Patron Capital.
The deal will give Cala an enterprise value of £1.35 billion ($1.8 billion) and result in cash proceeds of £1.16 billion, L&G said in a statement on Wednesday. The London-based insurer will use the sale’s proceeds primarily for its own growth and will also consider using them to buy back shares.
Shares of L&G dropped as much as 2.1% in early London trading with RBC analyst Mandeep Jagpal pointing out in a note that only £500 million of the consideration will be paid upfront.
The deal comes as the UK housing market is showing signs of revival on expectations the Bank of England will reduce interest rates further after cutting the benchmark last month for the first time in more than four years. The newly elected Labour government has also promised to fix an acute housing shortage through an overhaul of the country’s convoluted planning system, pledging to build 1.5 million homes over five years.
The past year has seen a series of deals involving property firms, including Barratt Developments Plc’s purchase of rival Redrow Plc.
Asking prices for UK houses increased at double their long-term average pace in September, signaling optimism among home-sellers. The average price of homes coming to the market rose 0.8% to £370,759, property portal Rightmove said in a report this week.
Cala’s net asset value stood at £1.15 billion at the end of the first half of 2024 and had generated operating profits of £42 million. The deal, which is expected to complete in the fourth quarter of the year, reduces L&G’s solvency capital requirement by about £100 million, according to the statement.
--With assistance from Damian Shepherd and Irina Anghel.
(Updates with share price, adds details throughout.)
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