Skip to main content

Market Overview

Compass Point On Ryland, Standard Pacific Deal: 'Merger of Equals Makes Sense, But Upside is Limited'


In a report published Monday, Compass Point analyst Wilkes Graham maintained a Neutral rating on Standard Pacific Corp. (NYSE: SPF) and Ryland Group Inc (NYSE: RYL), with price targets at $9 and $47, respectively, after the companies agreed to a "merger of equals."

On Sunday, June 14, the companies announced that their Board of Directors had unanimously approved a merger agreement to combine both the entities to create a single company with a market cap of roughly $5.2B. "The combined entity will own or control approximately 74k homesites in 41 markets across 17 states with new home offerings spanning from entry level to high-end luxury," analyst Wilkes Graham said.

Management expects production, purchasing and other synergies from the transaction to result in annual cost savings of $50M-$70M, with the majority of the savings being recorded by late 2016.

In the report Compass Point noted, "The geographic footprint and price points of the two companies have a fair amount of overlap, and the combined scale should allow for synergies that are required, along with multiple expansion, to make this transaction work for investors."

The deal appears to be marginally better for Standard Pacific's shareholders, since they will own 60 percent of the combined entity and the stock trades slightly lower than the combined valuation than does Ryland. "This transaction appears to us as a logical attempt by two quality builders to squeeze out a bit more juice in an industry where, with topped-out margins, the juice has run dry," Graham wrote.

While the merger does make sense, Graham believes that there is limited upside to the share price of the companies. There is 10-15 percent upside from the current valuations, assuming "the majority of synergies are realized in 2016," the report added.

Latest Ratings for SPF

Jun 2015FBR CapitalDowngradesOutperformMarket Perform
Jun 2015Raymond JamesDowngradesOutperformMarket Perform
Jun 2015Credit SuisseDowngradesOutperformNeutral

View More Analyst Ratings for SPF
View the Latest Analyst Ratings


Related Articles (RYL + SPF)

View Comments and Join the Discussion!

Posted-In: Compass PointAnalyst Color Price Target Reiteration Analyst Ratings

Latest Ratings

GDWolfe ResearchDowngrades
QRTEAB of A SecuritiesInitiates Coverage On
ABB of A SecuritiesDowngrades42.0
VCTRB of A SecuritiesUpgrades32.0
BSIGB of A SecuritiesUpgrades27.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at