Southern California home builders Standard Pacific Corp. and Ryland Group have agreed to merge in a stock transaction, creating a company that would have an equity market capitalization of about $5.2 billion and would operate in 17 states.
The combined firm, which hasn't been named yet, would own or control about 74,000 home sites. The two companies' operations delivered more than 12,600 homes and had combined revenue of $5.1 billion in the 12 months that ended March 31.
The merger would enable the new operation to save $50 million to $70 million a year, the companies said in a news release issued late Sunday. The combination would increase their geographic reach and ability to construct homes at a variety of price levels, from starter homes to luxury models, Standard Pacific and Ryland said.
"Combining two industry leaders with nearly 100 years of home-building experience between them puts us in a strong position to benefit from the continued housing market recovery," said Scott Stowell, chief executive of Irvine-based Standard Pacific.
When tallied together, the two companies build houses in 20 of the nation's top 25 metropolitan areas and are among the top five builders in 15 of those areas, he said.
Ryland Chief Executive Larry Nicholson said the two builders have similar cultures and long histories and "are each proud of where we've been and look to the future confident that we will be better together." Ryland is based in Westlake Village.
The transaction, billed as a "merger of equals," calls for Standard Pacific to conduct a 1-for-5 reverse stock split, meaning that five shares of the company's common shares will be combined into one. After that, Ryland shareholders will get 1.0191 share of Standard Pacific stock in exchange for each Ryland share.
Standard Pacific shareholders will own about 59% of the new company; Ryland shareholders will own 41%.
The combined company's board of directors will consist of five current Standard Pacific directors, including Stowell, and five current Ryland directors, including Nicholson. Stowell will become executive chairman, and Nicholson will be CEO.
The new company will maintain a corporate presence in California and will add a second corporate office on the East Coast.
A definitive agreement was approved by both companies' boards. The transaction is subject to approval by Standard Pacific and Ryland shareholders. The merger is expected to be completed in early fall, the companies said.