A takeover of FTSE 100-listed insurer Legal & General Group PLC (LSE:LGEN)’s housebuilding subsidiary Cala by fellow footsie constituent Persimmon PLC (LSE:PSN) would be a boon to the former’s share price, according to Deutsche Bank analyst Rhea Shah.
“City sources” told Sky over the long weekend that Persimmon is interested in the £1 billion auction.
Reports that L&G was mulling the sale of its housebuilding unit first emerged in March.
“A potential sale would not be a surprise given we expect L&G's CEO to talk about streamlining the group with the CMD (capital markets day) on June 10th,” said Shah.
“Overall, we see this as a positive, as it should provide optionality for growth and/or one-off capital return. “As such, ahead of the CMD, we reiterate our positive thesis on L&G, which is a top UK insurance pick.”
Shah pointed out that L&G shares trade at an “attractive” 9% forward dividend yield.
L&G stock is a buy with a 300p target price against a 249p publication price, said Shah.