UK home builder CALA Group is to be acquired by private equity firm Patron Capital and Legal & General Group, the insurance, savings and investment management company.
The investment by both Patron and Legal & General will provide CALA with greater balance sheet capacity and the funds to add significantly to its existing land bank.
This platform will enable the group to build on the positive momentum it has generated in recent years, with a medium term aim of increasing the size of the group substantially.
Under the terms of the agreement, Legal & General and Patron will each take a 46.5 per cent equity stake in CALA alongside CALA’s existing senior management team who will take a seven per cent share. The transaction comprises GBP140m of equity, and GBP70m of debt, valuing CALA at GBP210m. Patron will lead the investment and both Legal & General and Patron will have a representative on CALA’s board going forward. Lloyds Banking Group will continue its support of the business with a new GBP100m five year banking facility.
CALA’s premium market positioning and presence in more affluent areas of the UK such as the Home Counties, The Cotswolds and around Glasgow, Edinburgh and Aberdeen enabled the group to return to profitability in 2011 for the first time since 2007, one year ahead of management’s plans. In 2012, the group announced a six fold increase in profitability to GBP11.4m on a pre-tax basis for the 12 months to 30 June 2012 alongside a 35 per cent rise in completions to 875 homes and a 16.4 per cent house sales gross margin, up from 14.8 per cent the previous year.
At the half year ended 31 December 2012, home completions were up 13 per cent on the equivalent period last year, while pre-tax profits were GBP9.6m and the house sales gross margin was 19.7 per cent, up 5.9 per cent on the previous year.
Alan Brown, chief executive of CALA, says: “Today’s investment represents a significant step forward for CALA and we are now poised for the next phase of our growth. By selecting Patron, one of the leading European real estate private equity houses, and Legal & General, to support the Group in the next stage of our development, we have secured the backing of two highly respected investors who both share our vision for the business. I am also delighted that CALA’s excellent relationship with Lloyds Banking Group will be continuing and look forward to their ongoing support as we deliver the next phase of CALA’s growth strategy.”
Keith Breslauer (pictured), managing director of Patron, says: “This significant transaction for Patron highlights our confidence in CALA, its growth potential and the Group’s competitive position in the UK housebuilding sector, which is one of the key areas of focus for the economy due to its ability to create jobs and fuel economic growth.”
Wadham Downing, group M&A and strategy director at Legal & General, says: “We are very excited to have invested in CALA alongside Patron and CALA’s experienced management team. We are confident that with this combined expertise and financial resources that both Patron and Legal & General bring, we can build many more homes in the UK and help CALA grow and realise its potential.
”At our preliminary results we identified direct investment as one of our five drivers of growth. We are delighted to announce an acquisition in this area as our first M&A transaction for some time. We will continue our evolution as a group by combining our strength in organic growth with selected bolt-on acquisitions, which satisfy our strategic and financial criteria, across each of the five areas identified."