Toll Brothers will issue shares, take on new debt to acquire rival Shapell

Toll Brothers Inc. says it will issue more than 6 million shares and take on new debt to acquire rival homebuilder Shapell Industries in a deal valued at $1.6 billion, the Wall Street Journal reports.

Toll has a commitment for a $500 million, 364-day senior unsecured revolving credit facility, Fitch Ratings said in affirming its existing “BBB-” rating on the company’s debt. Toll Brothers intends to pay down debt by selling some of the land it will acquire in the deal, which is expected to close in March.

Shapell owns about 5,200 lots in the San Francisco Bay Area, Los Angeles, Orange County and Carlsbad, Calif.

“Toll has been operating in California since 1994 and knows the coastal markets of the state very well. Toll’s current average sales price in these markets is $840,000, and both companies serve affluent trade-up customers,” Fitch Ratings said in a statement published by Reuters.

“Entitled real estate is highly desired and in short supply in these coastal markets, and this acquisition will serve to meaningfully expand Toll’s real estate holdings in California and add scale to existing Toll operations within these markets. The addition of Shapell’s residential management team will add depth to Toll’s local homebuilding and land development team in coastal California.” Source: online.wsj.com