Toll Brothers gets more California lots with Shapell buy

Thu Nov 7, 2013 1:46am EST
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(Reuters) - Toll Brothers Inc (TOL.N: Quote) said it will buy the home building business of privately owned Shapell Industries Inc for about $1.60 billion in cash, in a deal that will give the largest U.S. luxury homebuilder more access to affluent real estate markets in California.

M&A activity picked up in 2013 among U.S. homebuilders, which have been struggling to meet burgeoning demand for new homes due to a shortage of land that is ready to build on.

Earlier this week, Tri Pointe Homes Inc TPH.N said it would buy Weyerhaeuser Co's (WY.N: Quote) homebuilding division in a $2.7 billion deal that will give it access to developed land in key markets such as California and Texas.

Toll Brothers will acquire Shapell's land portfolio, which consists of about 5,200 home sites, most of which are entitled, the company said in a statement late on Wednesday.

The land portfolio was assembled in many of California's most affluent and high-growth markets such as the San Francisco Bay area, metro Los Angeles, Orange County and the Carlsbad market, Toll Brothers said.

"This acquisition will provide significant growth over the coming years and, we believe, will be accretive to earnings in the first year, excluding transaction costs," Douglas Yearley, Toll Brothers chief executive, said in a statement.

Toll Brothers entered the California market in 1994, and has since delivered over 7,700 homes, generating revenue of about $6.5 billion from more than 90 communities in the state.

The homebuilder said it intends to tap its existing $1.04 billion credit facility, as well as debt and equity financing, to finance the deal. It expects new equity financing to represent 10 percent to 15 percent of the purchase price.

Toll intends to selectively sell land of about $500 million after closing the deal by the first calendar quarter of FY 2014.   Continued...