UK – Legal & General and Patron Capital have acquired UK housebuilder CALA from Lloyds for £210m (€245m) – £140m of it equity – in a deal that will provide a platform for future joint-venture acquisitions.
Under the terms of the deal, the partners will each acquire 46.5% equity in the firm.
CALA's existing management will hold the remaining 7%.
Legal & General will pay £65m of its equity investment upfront and the remaining £7m by March 2014 from group finances rather than from its annuity book or property subsidiary LGP.
A spokesman for the insurer said: "We're sitting on a considerable cash balance. It needs to earn a return, and this offers a better risk-adjusted return than Gilts. It's fortuitous that Patron Capital came along."
CALA has since 2010 targeted development land in England's southeast and affluent Scottish locations.
According to firm's February figures, it has a £3.1bn landbank deployable over the next five years.
Both investors cited macro drivers as a primary rationale for the investment.
Patron Capital managing director Keith Breslauer said: "The sector has enough supply, steady-state demand and complex planning rules. The trick is how to do it. In this case, there was a strong management team – and land that can be turned into assets."
The deal is Legal & General's first since it announced earlier this year that it intended to switch its investment focus from organic growth to bolt-on acquisitions related to "socially useful" infrastructure and UK residential assets.
The insurer proved unsuccessful in past attempts to amass a usable landbank.
The firm's chief executive told investors earlier this year a more appropriate name for Project Tiger, its previous attempt, would have been Project Sloth.
A spokesman said this week: "We're still keen to do it – and CALA gave us an opportunity to get it done quickly."
He said more, similar acquisitions were likely, especially from the annuity business.
"Annuitants want to invest domestically – in Cleveland UK, rather than Cleveland US," he said.
A percentage of affordable housing in existing developments and CALA's UK focus created additional incentives for the insurer to participate in the deal.
Each of the new owners will be represented on CALA's board.
Breslauer said: "We do not invest passively, and we were never a minority investor. To be strategically and operationally in control is part of the deal."
Around 50% of Patron Capital's acquisitions to date have been corporate investments.
"It's part of our raison d'etre," said Breslauer. "Asset-buying is not how we do it."