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Toll Brothers Prices Shares

Zacks Equity Research

Toll Brothers, Inc. (TOL) announced the pricing of its public offering of 6.3 million shares of its common stock of 1 cent per share par value at a price of $32.00 per share.

Citigroup of Citigroup Inc. (C), Deutsche Bank Securities of Deutsche Bank AG (DB), SunTrust Robinson Humphrey, and RBS are acting as lead book-running managers for the offering.

The offeringis expected to close on Nov 14, 2013 and is subject to certain customary closing conditions. The latest capital raising initiative will help the company reduce the total debt burden under credit facilities to some extent. Further, the proceeds can be used for financing its proposed $1.6 billion acquisition of Shapell Industries, Inc.

On Nov 6, Toll announced a definitive agreement to purchase the homebuilding business of Calif.-based home building company – Shapell Industries. The transaction is expected to boost its presence in the upscale Californian housing market.

Toll Brothers intends to complete the acquisition by 2014-end. The transaction is expected to be accretive to Toll Brothers’ earnings in the first year itself.

As of Jul 31, 2013, Toll Brothers had $97.7 million of borrowings outstanding, $2.4 billion of senior notes payable, $65.6 million of mortgage loans and unfunded commitments of $153.2 million.

Toll Brothers is optimistic about the growing momentum in the housing market and believes housing demand will continue to grow due to supply shortages. However, the housing momentum has slowed down recently due to low home purchases resulting from higher home prices, a rapid rise in mortgage rates and economic uncertainty.

Other Stocks to Consider

Toll Brothers sports a Zacks Rank #3 (Hold). Another stock in the sector that is performing well and deserves a mention is M/I Homes, Inc. (MHO) carrying a Zacks Rank #1 (Strong Buy).

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