Legal & General Group PLC on Wednesday said it has agreed to sell its housebuilding unit Cala Group to funds managed by Sixth Street Partners and Patron Capital.

The London-based insurer sold the business at an enterprise value of £1.35 billion, and L&G said it stands to receive cash proceeds of £1.16 billion. Of this, around £500 million will be paid at closing with the remaining consideration being paid over the next five years. As at June 30, Cala had a net asset value of £1.15 billion.

Proceeds will primarily be used to reinvest in the group in line with the strategy and capital allocation framework set out at June’s Capital Markets Event. L&G said it will also consider the proceeds as part of the intention to increase returns to shareholders through ongoing buybacks. The sale of Cala reduces the group’s solvency capital requirement by around £100 million, L&G said.

Chief Executive Antonio Simoes said: ‘This transaction demonstrates continued momentum in executing our strategy, simplifying our portfolio to enable a sharper focus on our core, synergistic businesses.’

‘The sale announced today will provide capital to deliver our strategic goals of sustainable growth alongside enhanced returns for shareholders.’

L&G, which offers products including life insurance and pensions offerings, had in June set out plans to create a ‘simpler and better-connected business’.

L&G plans to focus on three divisions, Institutional Retirement, Asset Management and Retail. In addition, it announced a new Corporate Investments Unit to maximise the value of non-strategic assets, with Cala sitting in that division.

The deal is expected to complete in the fourth quarter.

Shares in L&G fell 1.8% to 224.40 pence in London on Wednesday morning.

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