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China's second-biggest property developer, Evergrande Group, is in detailed talks to buy the upmarket British housebuilder Cala in a deal which could be worth close to £700m.
Sky News has learnt that Evergrande, which owns a stake in one of China's most popular football clubs, is the mystery suitor which has been in discussions with Carla's shareholders for several months.
The talks are said to be some way from resulting in a formal deal, but were described by one insider on Tuesday as "serious and credible".
Evergrande's emergence as the party in takeover talks with Cala comes after a frenetic period for the heavily indebted Chinese developer, which is listed on the Hong Kong Stock Exchange.
It recently announced an intention to sell a string of non-core assets, including dairy, water and oil businesses, as it reverses a strategy of diversification.
The company is also a shareholder in Guangzhou Evergrande Taobao FC, a professional Chinese football club.
Evergrande's move to acquire Cala comes as the UK Government embarks on a drive to deliver one million new homes by 2020.
Cala, which describes itself as the UK's most upmarket major homebuilder, is owned by Legal & General and Patron Capital, a specialist real estate investor.
Both investors are said to be keen on agreeing a deal with Evergrande, and have engaged Lazard, the investment bank, to advise them on the talks.
The Chinese bidder is being advised by KPMG.
Cala, which last month reported strong financial results for the year ended 30 June, could be worth more than £600m in any transaction, according to analysts.
If completed, its sale would represent a vote of confidence in the UK housebuilding sector, as well as underlining the opportunity for overseas buyers to acquire British companies more cheaply since the plunge in the value of sterling after June's EU referendum.
L&G and Patron took control of Cala in 2013 in a deal valuing the company at £210m, and it has made one substantial acquisition since then.
They have considered a stock market flotation of the company, and that remains an option depending upon the fate of the takeover discussions, according to insiders.
The approach to Cala emerged just weeks after Sajid Javid, the Communities and Local Government Secretary, pledged in his speech to the Conservative Party conference that ministers would deliver one million new homes by the end of the decade.
He said a £3bn Home Builders Fund would help to deliver 225,000 new houses, with a white paper on housing to be published by the end of the year setting out further steps to address the UK's poor construction record.
Cala's operations are concentrated outside London and the south-east, and focused on areas in the Home Counties, Cotswolds, and around Aberdeen, Edinburgh and Glasgow.
Alan Brown, Cala's chief executive, said the results reflected strong momentum, and he brushed off the impact of the UK's vote to leave the European Union.
"In the 13 weeks since the EU referendum result, and although still early days, the group saw positive trading with total enquiry levels and reservation rates up 9% and 46% respectively while website users have also risen by 32% on the equivalent period last year," he said.
"Sales prices have also remained stable while cancellation rates have actually reduced slightly."
Cala declined to comment on the talks with Evergrande, but said through a spokesman:
"Thanks to the quality of our brand and strong financial and trading performance, from time to time we may find ourselves the subject of speculation but from our perspective it is very much business as usual."
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