HOUSEBUILDER Cala is sounding out private equity buyers about a possible £250 million deal to sell the company amid a resurgence in the sector.
The Edinburgh-based firm, which recently posted its largest profit as a privately-owned company, yesterday declined to comment on either “rumours or speculation”. However, sources said Rothschild – the group’s adviser since 2010 – has been making the rounds in London to pave the way to a possible transaction.
The upmarket builder joins a number of housing companies looking to ride a recent swell in the battered sector.
Like many of its industry peers, Cala has benefited from concentrating on the premium end of the market, as well as government efforts to jump-start moribund home sales. Earlier this month, the company reported a sharp rise in year-end profits to £11.4m.
A similar rebound from historic lows has been the story across much of the sector, with quoted giants such as Barratt and Persimmon posting strong results in recent months. The revival in confidence has led Crest Nicholson – one of the biggest victims of the housing crash – to consider a return to a London listing.
Robin Hardy, an analyst with Peel Hunt, said the timing was good for valuations.
“That is why everyone is rushing to get these things back into the public arena, because they see there has been this spike,” Hardy said.
“That has translated into improved confidence across the sector, but there is still a lot of uncertainty and risk in the housing market, so this could be a small window.”
Despite rising fortunes in the quoted sector, analysts rank an imminent trade sale of Cala as an unlikely option.
A drop in land prices has been one of the main reasons for the sector’s recovery, as builders have upped their margins by constructing homes on cheaper ground.
Tom Gidley-Kitchin of Charles Stanley said any trade sale would therefore have to be keenly priced.
“I don’t think you could rule anything out, but my impression is companies that can afford to pay that much would probably think they were better off developing their own land banks,” he said.
Led by chief executive Alan Brown, Cala overhauled operations in 2009 via a debt-for-equity swap that gave Lloyds a 32 per cent stake in the business. The remainder is owned by Cala’s management and staff.
Net debt was £98.4m at the end of June, down from £116.1m a year earlier. The company has a land bank of 9,600 owed and contracted plots which it says have a potential development value of £3 billion.
Cala, which is looking to sell the vacant Donaldson’s College in Edinburgh, is focused on more affluent areas of the UK where house prices are relatively stable. This includes its home city in Scotland, as well as areas such as Aberdeen, the Cotswolds and the Home Counties.
Should the firm seal a private equity deal, it would follow in the footsteps of larger Edinburgh stablemate Miller Group, which is now more than 55 per cent owned by US investment group Blackstone. Miller gave up its status as a family-controlled business as part of a £160m refinancing deal at the end of 2011.
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