Southern California homebuilders Standard Pacific Corp. and Ryland Group Inc. said they agreed to merge, creating a company with about 74,000 home sites and resources to expand.
Standard Pacific stockholders will own about 59 percent of the combined company after a share swap, the builders said Sunday in a statement. Standard Pacific will implement a one- for-five reverse stock split, then give Ryland investors 1.0191 share for every one they hold. Fractional shares will be paid in cash.
The deal gives the companies greater geographic and product diversification as the U.S. housing market continues its recovery. The combined entity, which will build entry-level to luxury homes, will be in 41 metropolitan areas and 17 states. Within the next two years, the builders expect to develop a corporate presence on the east coast, according to the statement.
“What it helps them do is gain scale, both of them,” Drew Reading, an analyst with Bloomberg Intelligence, said in a telephone interview. “The most important thing for homebuilders is to establish scale in the markets you operate in.”
Standard Pacific, based in Irvine, closed at $8.36 last week, giving the company a market value of $2.3 billion, according to data compiled by Bloomberg. Ryland, based in Westlake Village, closed at $42.79, valuing it at $2 billion. In the 12 months ended March 31, the pro forma combined company delivered a total of more than 12,600 homes with combined revenue of $5.1 billion, according to the statement.
Standard Pacific Chief Executive Officer Scott Stowell will become executive chairman of the combined company, while Ryland’s chief, Larry Nicholson, will be CEO.
“I see advantages of having a national presence, synergy, cost savings and economies of scale,” Alex Barron, an analyst with Housing Research Center LLC in El Paso, Texas, said in a telephone interview. “These guys must think we’re still in the early innings of the recovery, which I would tend to agree with.”