Investment groups tipped to enter auction after 3i discusses £800m deal with social housing firm

Private equity groups are expected to start a bidding war for social housing specialist Keepmoat after it emerged that the firm could become the target of an approach from 3i.

Keepmoat is in talks with 3i over the possibility of a buyout, which could value the company at more than £800m. It is understood that Keepmoat’s board is considering a sale of the entire group or a stake in the company.

City sources this week predicted that as private equity firms are thought to be keen to enter the social housing sector, the interest from 3i would trigger an auction.

The market is particularly attractive owing to the growth in demand for social housing, and the rise in large regeneration projects.

One analyst said: “Keepmoat would be a typical target for a private equity buyer. With fewer targets remaining among private housebuilders, private equity is now turning its attention to social housing as the next best way to capitalise on the housing boom.”

Rival private equity firm Bridgepoint is among the companies thought most likely to bid against 3i for Keepmoat.

Like 3i, which is also pursuing property services consultant Erinaceous, Bridgepoint has shown a growing interest in property-related businesses.

Some analysts have predicted that trade buyers could enter the fray; however Keepmoat is widely considered too large a target for other companies in the sector, such as Connaught and Mears.

Contractor Kier, which already has a presence in the social housing sector, may be attracted to the company, as could Balfour Beatty, which recently entered the market through its acquisition of Mansell.

The firm could also become a target for housebuilders looking to increase their presence in regeneration, with city sources tipping Barratt and Persimmon as suitors.

David Blunt, Keepmoat chief executive, said: “We have an ambitious five-year plan and it is only right that our shareholders strategically review this to ensure we achieve these goals.”