Ambitious Scottish construction firm CALA has laid the foundations for major growth after a £200 million swoop for luxury English housebuilder Banner.
The Edinburgh-based company said the deal for the Beaconsfield-based Banner Homes would “significantly accelerate” plans announced a month ago to double the size of the business within three years.
The deal for independent Banner significantly increases CALA’s exposure to the strategically important Home Counties and Midlands marketplace which have been helping to power the English property markert resurgence in recent months.
Banner sold 235 homes during the twelve months to May 2013 at an average selling price of more half a million pounds.
Total group wide revenues came in at £111m, producing an operating profit of £16.4m at a gross margin of 24%.
Chief executive Alan Brown said the acquisition of Banner – a company which has consistently targeted the premium end of the housing market in a similar vein to CALA – made commercial sense.
“We are delighted to have acquired such a high quality business which fits perfectly with CALA’s own market position and expansion plans,” Mr Brown said.
Banner comes with a land bank of almost 1,100 plots, with an embedded gross margin consistent with CALA’s own margin target.
The merger of the two businesses will swell CALA’s overall prospective development land – which currently has a gross development valeue of £3.6bn – to almost 12,000 cnosented and allocated plots.
The combined CALA and Banner business will directly employ over 600 people and have a turnover of more than £500m in its first full year.
By 2017, it is envisaged the enlarged company will be developing around 2,000 homes per year at an average private selling price in the region of £400,000, pushing annual turnover past £800m.
Mr Brown said the purchase of Banner positioned the combined business in the top 10 of UK homebuilders with significant growth potential.
“Both businesses build high quality homes, place a strong emphasis on customer service and have very similar cultures and I am tremendously excited about bringing together the best of both CALA and Banner in order to drive the enlarged group forward,” Mr Brown said.
“Both CALA and Banner are trading strongly and, with a positive market backdrop, the ongoing support of our shareholders and a strong management team, the combined business is well placed to meet our long term growth plans.”
The deal for Banner – the value of which was not disclosed yesterday but which The Courier understands was in the order of £200m – was facilitated with additional equity from CALA’s owners Patron Capital and Legal & General with further support from Electra and additional investment from Banner’s senior directors.
The firm was also able to call on an increased debt facility through new banking arrangements led by Bank of Scotland with Santander.
BoS lead director Mark Prentice said: “We are proud to continue our support of CALA Group, by leading this syndicated facility to enable its expansion into new markets. As market conditions improve, Bank of Scotland remains committed to supporting growth in the sector.”