Legal & General Sells Cala Homes for Over £1 Billion: A Strategic Move

Legal & General has agreed to sell Cala Homes to investment groups Sixth Street Partners and Patron Capital for over £1 billion. This move is part of a comprehensive plan to streamline the company's portfolio and focus more intensively on its core business areas. The FTSE 100 company announced that the sale of the homebuilder—which sold approximately 3,000 homes last year—was completed at a corporate value of £1.35 billion. As part of the deal, Legal & General will receive £1.16 billion in cash. Patron had previously jointly held shares in Cala with L&G but sold them in 2018 at a valuation of £605 million. António Simões, the CEO of Legal & General, stated that the deal demonstrates the "ongoing momentum in executing our strategy to simplify our portfolio, allowing for a sharper focus on our core and synergistic businesses." Simões took over the company in January, succeeding Sir Nigel Wilson, who transformed the company over a decade with his vision of "inclusive capitalism," building housing, science parks, and other infrastructures that could be utilized by asset management funds or to hedge pension liabilities. The sale is the latest major transaction in the UK construction industry as developers recover from a painful downturn due to high mortgage rates and hope for market recovery as rates begin to fall. This year, Barratt acquired Redrow, while Bellway made an unsuccessful attempt to take over Crest Nicholson. The success of Sixth Street and Patron against FTSE 100 homebuilder Persimmon highlights the value of today's transaction. Sixth Street, a US-based firm with over $80 billion in assets under management and committed capital, invests in various sectors, including real estate. Julian Salisbury, the group’s Co-Chief Investment Officer, expressed optimism about continuing support for Cala and its management team, not only through capital but also through the significant resources of their London-based real estate investment team. Cala, a 150-year-old company focusing on Southern England, the Cotswolds, and Scotland, has increased its home sales from approximately 1,700 in 2017 to 2,917 last year. Last year, the company generated a revenue of £1.3 billion and a pre-tax profit of £112 million. For L&G, the sale represents a significant step in a strategy Simões presented at an investor day in June to make the company "simpler" and with a clearer investment case. The company stated that upon closing the transaction, expected by the end of the year, it will receive £500 million, with the remaining amount over five years. These funds will be reinvested into expanded business operations and used to support shareholder returns. In June, the company had already announced a £200 million buyback program.