The $5.2 billion merger will create the fourth largest home builder. It may kick off a series of deals among publicly held home builders. Fred Katayama reports.
Standard Pacific and Ryland will carry each other over the threshold. The home builders are merging in a $5.2 billion deal. Together, they'll become the industry's fourth largest after PulteGroup with sales exceeding $5 billion and they will own or control of 74,000 home lots. The deal enables them to expand their geographic reach and diversify their mix of offerings. While both companies are headquartered in Southern California, Standard Pacific is strong in its home base and focuses on home buyers who move up to more expensive homes. Ryland focuses on first-time home buyers and is strong in the Midwest and Northeast. The industry has seen a series of deals involving publicly held home builders buying private ones over the past few years. But the Standard Pacific-Ryland deal could kick off a series of deals between publicly held companies. The slow and uneven housing recovery may push them to focus on cutting costs. UBS analyst Susan Maklari said, "We expected the trend of public-to-public M&A to expand ... a moderate recovery increases the focus on cost controls and driving overhead leverage." Standard Pacific and Ryland say they expect the merger to produce annual cost savings of $50-70 million with most of that achieved by late 2016. Both companies' shares have outperformed the broader markets this year with Standard Pacific up nearly 15 percent; Ryland up nearly 11 percent.