Mactaggart & Mickel acquisition brings with it six live sites and a timber frame factory
Scottish housebuilder Springfield Properties has acquired the housing business of fellow Scottish developer Mactaggart & Mickel Group for £46.3m.
The deal includes six live private and affordable sites with a fair value of approximately £15m, and fixed assets as well as a timber frame factory near Glasgow.
The total consideration will be split between £10.5m cash paid on completion and a deferred cash payment of £35.8m to be given proportionally as homes are sold over the next five years.
Springfield, which reported a profit slump earlier this year, will fund the acquisition from its internal resources and existing debt facilities with the Bank of Scotland.
As part of the deal, the housebuilder has also acquired a brand licence to build homes as Mactaggart & Mickel on a further 11 private and affordable sites, which will transfer to Springfield as homes are sold.
Of the total 17 sites acquired, 16 have planning permission, which equates to about 700 homes with a gross development value of around £230m.
The group expects to generate gross margins on these sites in line with margins delivered by the rest of the group. Springfield aims to keep Mactaggart & Mickel’s housebuilding employees as well as those people employed at Timber Systems, the timber frame factory near Glasgow that it is acquiring.
Springfield already has a timber frame factory and constructs 90% of its homes from timber kits, but says this second factory will increase capacity for future growth.
Springfield and Mactaggart & Mickel have also established a strategic alliance with an agreement that allows the former to acquire sites from the later’s remaining land bank of approximately 2,300 acres across Scotland in the future.
Innes Smith, chief executive of Springfield Properties, said: “As well as bringing another premium brand into the group, this acquisition gives us land, with planning permission, in areas of significant demand. The structure of the acquisition – with the majority of the payment to be made as homes are completed – de-risks the deal and creates an effective and efficient means of acquiring land.”
Paul McAninch, group finance director of Mactaggart & Mickel, added: “Our company has had a proud tradition as a leading housebuilder in Scotland, which is built on the work of its dedicated teams.
“This tradition will continue, and I’m pleased that there will be continuity of employment as a result of this agreement.”
For the year to 31 May 2022, the group expects to report results in line with market expectations, with good revenue growth and a better-than-expected reduction in net debt to about £39.0m at year end, compared to £43m on 30 November 2021.
Equity analytics company Progressive has raised its full year pre tax profit estimates for next year and 2024 for the Scottish housebuilder by 5% and 10%, respectively, in light of the acquisition.
It said it is not changing its net debt estimates because the deal was structured with payments phased over five years.