Taylor Wimpey has dropped out of the running for Cala Homes after its opening bid was knocked back by Legal & General, which is hopeful that its housebuilding business will fetch at least £1 billion.
The housebuilder, one of the biggest in Britain, is understood to have tabled an offer as part of the first round of bidding. One source familiar with the sales process said it was “a very low offer”.
Persimmon, another FTSE 100 developer, is still in the running, having made it through to the second round, although it will have to improve on its first offer, which has been described as “a bit underwhelming”.
“Private equity [firms] are still the favourites as they can stump up cash, whereas a trade buyer would have to offer paper and cash,” an insider said.
Patron Capital, which sold a majority stake in Cala to Legal & General in 2018, is still in the process. Bridgepoint, TDR Capital and Terra Firma are among the other private equity houses said to have looked at Cala, but their interest is understood to have cooled.
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Representatives for Taylor Wimpey, Persimmon and Patron declined to comment. A spokeswoman for Legal & General was contacted for comment.
Shares in listed housebuilders rose on Friday after Labour’s victory in the general election amid expectations that they will benefit from the new government’s promises to build new homes and to reform the planning system.
Cala Homes traces its roots back to Aberdeen in 1875 and it is now wholly owned by Legal & General, the insurance company. It builds properties in Scotland near Edinburgh and Glasgow, as well as in England, predominantly in the southeast. Generally it builds more “premium” houses, for those taking the second step on the housing ladder, than affordable, first-time buyer homes.
Legal & General confirmed last month that it was open to offers for Cala as part of plans to simplify the group by António Simões, the new chief executive of the insurer.
That two of the listed players are, or were, in for Cala raised eyebrows among some in the City. Getting planning permission for building on land has been slow and difficult in recent years, which has increased the attraction of buying a rival and its ready-made landbank.
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Anthony Codling, a sector analyst at RBC, the broker, said recently that “the tide is turning”, given Labour’s pledge to free up the planning system as part of its wider target of building 1.5 million homes over the next five years. “L&G may find it is entering a buyer’s rather than a seller’s market,” Codling said.
However, some industry bosses, although welcoming Labour’s ambition, are sceptical about how quickly the new government can “turn the taps on”, which perhaps explains why several housebuilders are still looking to buy or merge with rivals.
In addition to Cala being up for sale, Barratt Developments and Redrow are hoping to get their £7 billion merger over the line this year. Crest Nicholson is also in play, having rebuffed two offers from Bellway this summer. Bellway is still weighing a bid and now Avant Homes, the housebuilder run by Jeff Fairburn, the former Persimmon boss, is circling.
Before Avant’s interest in Crest emerged last week, it had been mooted as a possible bidder for Cala. It is unclear whether any interest remains now that it is pursuing Crest. Fairburn, 58, is known to have met City bankers in recent months to explore how to expand Avant.
