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Legal & General Group Plc (LSE:LGEN) has agreed to sell its UK-based housebuilder, CALA Group, in a deal valued at £1.35 billion. The buyer, Ferguson Bidco Limited, is owned by funds managed by Sixth Street Partners and Patron Capital. The transaction, expected to close in Q4 2024, reflects L&G’s ongoing efforts to streamline its portfolio, optimize capital allocation, and enhance shareholder returns.
Financial Terms of the Sale
The sale of CALA Group is set to generate £1.16 billion in cash proceeds for Legal & General, adjusted for net debt. Upon closing, L&G will receive an initial payment of approximately £500 million, with the remainder to be paid over the next five years on a deferred, non-contingent basis.
CALA Group, a major player in the UK housing market, had a net asset value (NAV) of £1.15 billion as of the first half of 2024 and generated operating profits of £42 million. The sale aligns with L&G’s long-term capital strategy, which was outlined during the Group’s Capital Markets Event (CME) in June 2024. Proceeds from the sale will be reinvested into the Group, focusing on enhancing capital efficiency and growth prospects.
Capital Allocation and Shareholder Returns
The divestment of CALA will allow L&G to focus on more strategic, high-return investments. The Group's management has reiterated that the sale is part of a disciplined approach to capital allocation. Following the sale, L&G’s Solvency Capital Requirement (SCR) will be reduced by approximately £100 million, contributing to stronger financial stability.
As part of its strategy to increase shareholder returns, L&G will also consider allocating part of the proceeds to ongoing share buybacks. This move follows the Group’s intention to enhance shareholder value, as discussed at the recent CME. The exact details of the reinvestment and buyback programs will be clarified as the proceeds from the sale become available.
About CALA Group
CALA Group is recognized for its high-quality homes in prime locations throughout the South of England, the Cotswolds, and Scotland. Over the years, CALA has built a strong reputation for delivering well-designed properties that appeal to buyers seeking quality living spaces in desirable areas. Under Legal & General’s ownership, CALA expanded its footprint and enhanced its development pipeline, contributing to the UK housing market.
However, L&G’s decision to sell CALA is driven by its strategic review and desire to allocate capital toward higher-growth opportunities, following the establishment of a new Corporate Investments Unit.
Outlook and Conclusion
The sale of CALA is expected to close in the fourth quarter of 2024, subject to regulatory approval and customary closing conditions. L&G’s management remains optimistic about the Group’s future, focusing on its core business areas and strategic reinvestment opportunities.
