Luxury-home builder Toll Brothers to buy Californian homebuilder Shapell

Toll Brothers, the largest luxury-home builder in the United States, has agreed to buy Shapell Industries' homebuilding business for about US$1.6 billion, gaining 5,200 lots in the Los Angeles and San Francisco Bay areas as buyer demand for housing rises.

Toll will pay for Beverly Hills, California-based Shapell with debt and a share offering

The deal will more than double the number of California lots controlled by Toll to about 9,200, with most in coastal markets where vacant land is hard to come by, chief executive officer Douglas Yearley said.

"It's a game-changer for this company," Yearley said. "It's the most exciting acquisition we've had in our 46-year history."

Developers are stocking up on land as US home values climb at their fastest pace in seven years. Last week, California-based Tri Pointe Homes agreed to buy the homebuilding division of Weyerhaeuser for US$2.7 billion.

In the Shapell deal, 10 to 15 per cent of the purchase price will be covered by issuing new Toll shares, and Toll plans to sell about US$500 million of land from the Shapell portfolio. The Pennsylvania-based builder also stands to make money immediately by selling homes in Shapell's backlog.