Toll Brothers Completes $1.6 Billion Acquisition Of Shapell


Toll Brothers Inc., a builder of luxury homes, has completed its acquisition of the home-building operations of Shapell Industries LLC (Shapell Homes), a private California land development and home-building company, for approximately $1.60 billion in cash.

The purchase includes approximately 5,200 home sites, 97.5% of which are entitled, in established coastal California communities. Toll Brothers says this land was assembled by Shapell over many decades in many of northern and Southern California's most affluent and high-growth markets: the San Francisco Bay area, metro Los Angeles, Orange County and the Carlsbad market.

‘We announced this transaction on Nov. 6, 2013. Since then, we have focused on integrating Shapell Homes into our company and have become even more excited about the Shapell land portfolio and the approximately 100 Shapell associates who will be joining our team," notes Douglas C. Yearley Jr., CEO of Toll Brothers.

"Our new five-year floating rate term loan is at a rate currently below 2% with covenants substantially similar to our existing $1.035 billion five-year and new $500 million 364-day revolving credit facilities," he adds. He also notes that closing the acquisition at the beginning of both the second fiscal quarter and "spring selling season" was part of Toll Brothers' strategy.

Toll Brothers financed the acquisition with a new $485 million five-year senior unsecured floating rate bank term loan, as well as $600 million of recently issued five-year and 10-year senior unsecured debt and $230 million of common stock.

The balance of the funds will consist of a $370 million draw from its existing $1.035 billion five-year bank revolving credit facility. In addition, the company closed on a $500 million 364-day unsecured bank revolving credit facility, which it does not plan to draw on for this transaction.

Between cash and untapped bank credit facilities, the company still has approximately $1.5 billion of available liquidity to support current operations and future growth. As previously announced post-closing, Toll Brothers says it intends to selectively sell approximately $500 million of land to return some expended capital and manage its California concentration.

As a result of these lot sales and the delivery of existing backlog, the company believes it will recapture a significant portion of its investment within 18 months of closing the transaction.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., PNC Capital Markets LLC, RBS Securities Inc. and SunTrust Robinson Humphrey Inc. acted as joint lead arrangers and joint bookrunners for the $500 million 364-day senior unsecured credit facility, with Citibank NA as administrative agent, Deutsche Bank Securities Inc. and The Royal Bank of Scotland PLC as syndication agents, and SunTrust Bank and PNC Bank NA as documentation agents.

SunTrust Robinson Humphrey Inc. acted as sole lead arranger and sole bookrunner for the $485 million five-year senior unsecured term loan, with SunTrust Bank as administrative agent; Sumitomo Mitsui Banking Corp. and U.S. Bank NA as syndication agents; Capital One NA and Wells Fargo Bank NA as documentation agents; and The Bank of New York Mellon, Beneficial Bank, Fifth Third Bank, PNC Bank NA and Mega International Commercial Bank New York Branch as lenders.

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