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Toll Brothers expands Calif. presence via Shapell deal

Toll Brothers is expanding its footprint in California through the purchase of Shapell Industries' home building business.

"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," said Douglas Yearley, Toll Brothers chief executive.

The deal, valued at $1.60 billion, will allow the homebuilder to secure 5,200 lots -- most of which are entitled -- in affluent California markets. Toll Brothers will use its existing $1.04 billion credit facility, plus debt and equity financing, to complete the purchase. The company also plans to sell various lots (to a tune of about $500 million) by the first quarter of 2014.

Toll Brothers has been building in California since 1994 and has completed over 7,700 homes in the state, worth about $6.5 billion in revenue.

The company said in a statement that it expects to realize a return on investment within 18 months of closing, as well as an estimated 65% increase in fourth-quarter revenue thanks in part to home price increases.


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