The stocks of Standard Pacific Corp. and Ryland Group Inc. rose sharply in early trading Monday in response to the home builders' plans for a $5.2-billion merger.
Standard Pacific gained 47 cents, or 5.6%, to $8.83 a share while Ryland's stock rose $2.23, or 5.2%, to $45.02 a share.
The two Southern California-based companies -- Standard Pacific is headquartered in Irvine and Ryland is based in Westlake Village -- announced Sunday night that they planned a "merger of equals" via an exchange of shares.
They said the deal would give the newly merged company, which hasn't been named, a more diversified product line and wider geographic reach.
Standard Pacific focuses on upscale homes and Ryland builds mostly lower-priced models. Together they would operate in 41 metropolitan areas in 17 states.
The two companies last year sold a combined 12,633 houses, which would make the new firm the nation's fourth-largest home builder behind D.H. Horton Inc., Lennar Corp. and PulteGroup Inc.
Standard Pacific and Ryland said they also wanted to join forces ahead of what they expect will be additional mergers of home builders as growth in the U.S. housing industry remains sluggish.
"We also believe that there may be more consolidation in our industry over time, and our waiting would have risked our chance of choosing what we believe is the best possible combination for our stockholders," Standard Pacific Chief Executive Scott Stowell said on a conference call with analysts Monday.
Shares of the other leading home builders, including D.H. Horton and Lennar, also rose modestly Monday while the stock market overall suffered broad losses.