Bridgepoint wants to focus on the north of England and Scotland, where Miller Homes operates
Private equity group Bridgepoint is nearing a deal to acquire Miller Homes, a UK housebuilder whose business faltered during the financial crisis.
The private equity owner of Pret A Manger is set to pay about £655m for the business, according to two people familiar with the discussions. Miller Homes is majority owned by Blackstone alongside other minority stakeholders including Lloyds and Coller Capital.
The price being paid represents 5.1 times expected earnings before interest and taxes projected for 2017, a person with direct knowledge of the deal said. It represents 1.3 times the value of the company’s assets, which stand at about £500m.
Miller’s potential new owner wants to tap into what it sees as a “structural shortage” of about 1m homes in the UK, with a specific focus in the north of England and Scotland, where the Edinburgh-based company operates, the person said.
Bridgepoint wants to grow Miller mainly through the construction of homes but further acquisitions have not been ruled out, they added.
The deal, which is the first housebuilder bought by Bridgepoint in more than a decade, is expected to be announced in the next 48 hours, the people said. They cautioned the deal could still fall apart.
Bridgepoint declined to comment on the matter. Blackstone and Miller did not immediately respond to a request for comment. Moelis is advising Bridgepoint and Rothschild is adviser to Miller.
Miller was one of several housebuilders taken over by their lenders during the financial crisis as they battled with writedowns on land values combined with a drop in sales.
But it has since recovered along with peers, and reported a 44 per cent jump in pre-tax profit to £89m for the year to December 2016.
Like its rivals, Miller has benefited from the government’s Help to Buy equity loan scheme for homebuyers, enabling them to purchase with a deposit of only 5 per cent. This accounted for 35 per cent of its sales in 2016.
But housebuilders have also been helped by low interest rates and pent-up appetite for new homes, especially among first-time buyers. Miller built 2,380 homes in 2016, up 11 per cent from a year earlier.
Another housebuilder with private equity owners, Cala Homes — owned by the insurer Legal & General and the property specialist Patron Capital — had been set for a sale to the Chinese group Evergrande, but talks stalled earlier this year, according to people close to the deal.
Others, such as Countryside — now a FTSE 250 group — opted to float on the stock market as the sector recovered. But Miller pulled a planned flotation in 2014, blaming market volatility.