Toll Brothers Announces Agreement to Purchase Shapell Homes; Acquisition Will Significantly Expand Toll’s California Presen
Orsham, Pa. and Beverly Hills, Calif.—Toll Brothers Inc. and Shapell Industries Inc. announced that they have entered into a definitive purchase agreement under which Toll Brothers will acquire the home building business of Shapell in a stock acquisition for approximately $1.60 billion in cash.
Shapell has a long and illustrious history as one of California’s largest and most successful land development and home building companies in the affluent coastal markets of Northern and Southern California. Since its founding in 1955 by brothers Nathan and David Shapell, and brother-in-law Max Webb, Shapell has delivered more than 70,000 homes. Shapell’s land portfolio, which Toll Brothers is acquiring, consists of approximately 5,200 home sites, 97.5 percent of which are entitled, in established communities. This land was assembled over many decades in many of the state’s most affluent and high-growth markets: the San Francisco Bay area, metro Los Angeles, Orange County and the Carlsbad market. Through August 31st of calendar year 2013, Shapell has delivered 347 homes at an average price of $791,000.
Having entered the California market in 1994, Toll Brothers has delivered over 7,700 homes, generating approximately $6.5 billion in revenue from more than 90 communities in the state. Toll Brothers is currently offering homes in nine communities in affluent Coastal California markets at an average price of approximately $1 million. The approximately 5,200 lots Toll Brothers expects to acquire from Shapell would bring Toll Brothers’ total lots owned and controlled in California to approximately 9,200.
Toll Brothers intends to finance the transaction with a combination of draws from its existing $1.035 billion credit facility as well as debt and equity financing. In addition, Toll Brothers has received a supplemental commitment for a $500 million, 364-day senior unsecured revolving credit facility. The Company currently expects new equity financing to represent 10-15 percent of the purchase price. After the transaction is completed, the Company still anticipates having more than $1 billion of available liquidity. Post-closing, Toll Brothers intends to selectively sell land of approximately $500 million. As a result of these lot sales and delivery of existing backlog, the Company believes it will receive a significant return of its investment within eighteen months of closing the transaction.
The transaction is subject to the satisfaction of customary closing conditions and regulatory approvals, including expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The transaction is expected to close in the first calendar quarter of FY 2014. Separately, the Shapell family will retain ownership of its retail, commercial and multi-family businesses through other entities.