- Legal & General selling Cala
- Deadline for bids next week
- Price seen around £1 billion
In a sign of growing confidence among housebuilders, it has been reported Persimmon (PSN) could bid for smaller rival Cala Group which has been earmarked for sale by owner Legal & General (LGEN).
Shares in the York-based homebuilder cheapened 32p or 2% to £14.50 as investors prepared themselves for a potential capital raise.
PREMIUM PRICE
FTSE 100 insurer Legal & General has a sizeable property portfolio as well as an interest in the new-build sector, and is marketing Edinburgh-based Cala with a mooted price tag of £1 billion.
According to Sky News, Persimmon management is ‘leaning towards’ putting in a bid for Cala ahead of next week’s deadline which would make it the biggest deal the firm has done in many years.
Among its attractions are Cala’s presence in Scotland, the Midlands and the south-east of England as well as a significantly higher average selling price for its premium properties.
Cala is targeting 3,000 units per year, while Persimmon – which is the UK’s third-largest builder after Taylor Wimpey (TW.) and Barratt Developments (BDEV) – recently said it was on track to complete between 10,000 and 10,500 new homes this year despite a weak first quarter.
As of December 2023, Persimmon had a cash pile of £420 million, which was significantly lower than the £860 million it recorded at the end of 2022, so based on the £1 billion asking price for Cala it looks as though the firm would either have to use its debt facilities or raise cash from investors.
CONSOLIDATION CONTINUES
Any deal in the house-building sector is likely to attract the attention of the CMA (Competition and Markets Authority) which has already criticised the industry for exchanging commercially-sensitive information and has flagged Persimmon as well as Taylor Wimpey in its investigation.
However, interest in Cala is likely to be strong given both the main UK political parties want to increase the number of new homes being built and the sale represents a rare opportunity to acquire critical mass in a competitive industry.
Earlier this year, Barratt Developments swooped on smaller rival Redrow in a £2.5 billion deal to create the UK’s biggest publicly-quoted developer in terms of annual build numbers.
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