Standard Pacific, Ryland Group to merge in $5.2B deal

Chris Woodyard | USA TODAY

LOS ANGELES — Two major homebuilders, Standard Pacific and The Ryland Group, announced a merger agreement Sunday in a deal that would form a single company with what they say would be an equity market capitalization of $5.2 billion.

Standard Pacific (SPF) and Ryland (RYL), both based in Southern California, said they would own or control 74,000 home sites. They built 12,600 homes worth $5.1 million in the 12 months ending on March 31 alone.

By merging, the two companies think they will see cost savings of $50 million to $70 million a year. They haven't picked a new name yet.

"Combining two industry leaders with nearly 100 years of homebuilding experience between them puts us in a strong position to benefit from the continued housing market recovery," Standard Pacific CEO Scott Stowell said in a statement. "With this merger we gain both geographic and product diversification, expanding our reach and enhancing our growth prospects in the entry level, move-up and luxury market segments."

Stowell will be executive chairman, while Ryland's chief, Larry Nicholson, would become CEO of the combined company.

Stowell said that as a single company, they will be building houses in 20 of the top 25 metro areas in the U.S. In 15 of them, they will be the top five in market share. As such, they say they expect to open a corporate office on the East Coast in addition to the California headquarters.

Standard Pacific said it will implement a one-for-five reverse stock split at the time of the merger. That means five shares of its stock will be combined into a single share. Ryland shareholders will receive 1.0191 shares of Standard Pacific stock for each share of their own.

The companies said the exchange ratio was based on the 28-day volume weighted price from May 5 to Friday. When the deal closes, Standard Pacific shareholders will own 59% of the combined company. Ryland shareholders will have the remaining 41%.

"Today our industry reaches a significant milestone as two of its best operators combine forces," Nicholson said in a statement. "With similar cultures and long histories of crafting quality homes and providing superior customer service, we are each proud of where we've been and look to the future confident that we will be better together."