L&Gs First Direct Investment - CALA
LEGAL & GENERAL'S FIRST DIRECT INVESTMENT IN HOUSE BUILDER - CALA GROUP
18 March 2013
Legal & General Group Plc ("Legal & General" or the "Group") has today agreed to acquire an interest in CALA Group Ltd ("CALA"), the UK's premium major home builder, from Lloyds Banking Group. The acquisition values CALA at £210m.
Legal & General will acquire a 46.5% equity stake in CALA, as an equal partner with Patron Capital Partners ("Patron"), alongside management who will take a 7% share. The acquisition will be financed by £140m of equity and £70m of debt. Legal & General and Patron will both have a representative on CALA's Board.
Legal & General's £65m equity investment will be financed from its own resources and comprises initial consideration of £58m and £7m of deferred consideration payable by 17 March 2014. The acquisition is expected to be earnings accretive for Legal & General in its first year and is expected to deliver a return above the Group's weighted average cost of capital. There is no goodwill associated with this transaction.
Legal & General has identified direct investments as a key driver of growth and the acquisition marks the Group's first direct investment of this kind. The acquisition forms part of a strategy to target socially useful projects (including housing, education, transport and energy sectors) that deliver high rates of return and fit Legal & General's financial and strategic criteria.
CALA has a premium market positioning and a presence across the UK in more affluent areas such as the Home Counties, the Cotswolds, and around Glasgow, Edinburgh and Aberdeen. As at 30th June 2012 CALA had gross assets of £354m and profit before tax for the year of £11.4m. CALA's current land bank comprises approximately 15,300 plots, including 9,900 owned and contracted, and a longer term strategic land bank of circa 5,400 plots. Owned and contracted plots represent approximately 10 years' output on current projections, with a potential gross development value of £3.1bn.