Standard Pacific Corp (NYSE:SPF) has announced its intentions to form a merger with Ryland Group (NYSE:RYL) in a deal to form a single company worth roughly $5.2 billion. A merger between the two Southern California-based homebuilders would create a company that would own or control 74,000 home sites across the region. Standard Pacific stock rallied after the announcement, rising 5.6 percent in early morning trading to $8.83 a share. Ryland’s stock value increased 5.2 percent to settle at $45.02 a share.
The merger agreement was announced Sunday evening. Standard Pacific CEO Scott Stowell has been tapped to helm the combined company as executive chairman, while Ryland’s chief, Larry Nicholson, would become CEO. The transaction is subject to approval by shareholders of both companies and is expected to be completed in the early fall. A new name for the combined company will be announced before the deal closes.
Standard Pacific has announced the implementation of a one-for-five reverse stock split at the time of the merger, combining five shares of its stock into a single share. Ryland shareholders will receive 1.0191 shares of Standard Pacific stock for each Ryland share they own. Standard Pacific shareholders will own 59 percent of the combined company after the merger, while Ryland shareholders will own the remaining 41 percent.
The two companies are considered leaders in the homebuilding industry and have approximately 100 years of homebuilding experience between them. Merging the two companies would widen their geographical reach and improve their prospects for future growth. The merger would also result in cost savings of $50 million to $70 million annually for the new company.
The deal would combine two of the nation’s largest builders of homes and would effectively put the two companies in a stronger position to capitalize on the recovering housing market. Standard Pacific builds upscale homes, while Ryland builds mostly lower-priced models. In the 12 months ending on March 31, the two companies combined built 12,600 homes and had combined revenue of about $5.1 billion. After the merger, the new company would operate in 41 metropolitan areas in 17 states.