Toll Brothers to Purchase California Builder for $1.6 Billion
November 12, 2013
Toll Brothers Inc. has entered into a definitive purchase agreement to acquire the home building business of Shapell Industries in a stock acquisition for approximately $1.60 billion in cash.
Since being founded in 1955 by brothers Nathan and David Shapell, and brother-in-law Max Webb, Shapell has delivered more than 70,000 homes in California. 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. These markets include the San Francisco Bay area, metro Los Angeles, Orange County and the Carlsbad. Through Aug. 31, 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 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.
"We are honored and thrilled to have been selected by the Shapell family to continue the legacy of such an amazing company,” said Douglas Yearley Jr., Toll Brothers' chief executive officer. “The tremendous land portfolio the Shapell family has amassed over decades in California presents an incredible opportunity for Toll Brothers. 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. Shapell's current portfolio dovetails perfectly with our own California footprint and luxury brand, and adds meaningfully to our presence in premier coastal locations in California.”
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. 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 fiscal year 2014.
“We believe this is the right acquisition at the right time in the right location for Toll Brothers,” said Robert Toll, Toll Brothers’ executive chairman. "We believe this positive side of the housing cycle has significant distance to run, and that this acquisition should mesh well with the strength in the market."