Toll Brothers gets more California lots with Shapell buy

Reuters

* Toll Brothers to buy Shapell Homes for $1.60 bln in cash

* Deal will help Toll secure 5,200 lots in California

* Deal to be financed with credit facility, debt and equity

* Toll intends to sell $500 mln of land post deal closing

* Preliminary Q4 revenue seen up 65 pct to $1.04 bln

Nov 7 (Reuters) - Toll Brothers Inc said it will buythe home building business of privately owned Shapell IndustriesInc for about $1.60 billion in cash, in a deal that will givethe largest U.S. luxury homebuilder more access to affluent realestate markets in California.

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

Earlier this week, Tri Pointe Homes Inc said itwould buy Weyerhaeuser Co's homebuilding division in a$2.7 billion deal that will give it access to developed land inkey markets such as California and Texas.

Toll Brothers will acquire Shapell's land portfolio, whichconsists 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'smost affluent and high-growth markets such as the San FranciscoBay area, metro Los Angeles, Orange County and the Carlsbadmarket, Toll Brothers said.

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

Toll Brothers entered the California market in 1994, and hassince 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 $1.04billion credit facility, as well as debt and equity financing,to finance the deal. It expects new equity financing torepresent 10 percent to 15 percent of the purchase price.

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

"As a result of these lot sales and delivery of existingbacklog, the company believes it will receive a significantreturn of its investment within eighteen months of closing thetransaction," the company said.

The Shapell family will retain ownership of its retail,commercial and multi-family businesses through other entities.

SEES HIGHER FOURTH-QUARTER REVENUE

Toll Brothers estimated a 65 percent increase in itsfourth-quarter revenue to about $1.04 billion.

Analysts were expecting fourth-quarter revenue of $921.03million, according to Thomson Reuters I/B/E/S.

"The price increases we have been instituting in manycommunities over the past year, combined with the accelerationin sales paces per community, are driving our revenue growth,"Yearley said.

The company said that the average price of homes deliveredin the quarter ended Oct. 31 rose to about $703,000 from$582,000 a year earlier.

Toll also said that 2013 backlog rose to 3,679 units andabout $2.63 billion.

Shares of Toll Brothers closed at $32.52 on the New YorkStock Exchange on Wednesday.

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