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Standard Pacific And Ryland Group Want To Merge, Form The Fourth Largest Homebuilder In The Country

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Standard Pacific And Ryland Group Want To Merge, Form The Fourth Largest Homebuilder In The Country

Standard Pacific Corp. (NYSE: SPF) and Ryland Group Inc (NYSE: RYL) announced a merger of equals in a joint conference call this morning. Each company's CEO and CFO joined in on the call to break the news.

Transaction Overview

The executives expect the deal between the two real estate firms to close sometime this fall, subject to SEC review and shareholder approval.

They declared a fixed exchange ratio of 1.0191 SPF shares for each RYL share. Standard Pacific shareholders will own about 59 percent of the new company while Ryland shareholders will get about 41 percent. The company will operate as one brand, with a new name and ticker to be announced.

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The new company's executive board will be comprised primarily of former executives of the merging firms. Standard Pacific CEO Scott Stowell will serve as Executive Chairman while Ryland Group CEO Larry Nicholson will continue as CEO and President.

Strategic Rationale

The merger will create the fourth largest home builder in the United States. Executives plan to utilize economies of scale to boost operating efficiencies. A larger market capitalization should also provide enhanced capital markets opportunities and increase investor liquidity.

The merger will also diversify the regions in which the companies do business. Standard Pacific and Ryland collectively operate in 20 of the top 25 Metropolitan Statistical Areas (MSA's) in the country -- the new company will be top five in market share in 15 of these MSA's.

"The combined geographic footprint capitalizes on Standard Pacific's longstanding California foothold, Ryland's Midwest and East Coast strengths and the collective depth of the companies in the Sunbelt markets," according to Standard Pacific CEO Scott Stowell.

These complementary footprints, according to company execs, will drive cost synergies and new growth opportunities.

Additionally, execs believe that the firms share similar management styles and operating philosophies, which should help lead to a smooth transition period during the early days of the new corporation.

The New Firm

Here's a breakdown of what the new company would look like based on statistics from Standard Pacific and Ryland Group.

  • 41 MSA's served
  • 74,000 total lots owned and controlled
  • $5.1 billion in LTM revenues
  • $625 million in LTM pre-tax earnings
  • $2.5 billion in 1Q15 backlog value

In early Monday morning trading, Standard Pacific shares are up 6 percent, while Ryland investors have booked a 5.6 percent gain.

 

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