IRVINE and WESTLAKE VILLAGE, CA -- Standard Pacific Corp. and The Ryland Group, Inc. announced that their respective boards of directors have unanimously approved a definitive merger agreement pursuant to which Standard Pacific and Ryland will combine in a merger of equals to create a single company that would have an equity market capitalization of approximately $5.2 billion, an enterprise value of approximately $8.2 billion, and would own or control approximately 74,000 homesites. In the 12 months ended March 31, 2015, the pro forma combined company delivered more than 12,600 homes in the aggregate with combined pro forma revenues of $5.1 billion.
Standard Pacific President and Chief Executive Officer Scott Stowell said, "Combining two industry leaders with nearly 100 years of homebuilding experience between them puts us in a strong position to benefit from the continued housing market recovery. With this merger we gain both geographic and product diversification, expanding our reach and enhancing our growth prospects in the entry level, move-up and luxury market segments. Together, we will build homes in 20 of the top 25 MSAs in the United States and will enjoy top 5 market share in 15 of these MSAs."
Ryland President and Chief Executive Officer Larry Nicholson said, "Today our industry reaches a significant milestone as two of its best operators combine forces. With similar cultures and long histories of crafting quality homes and providing superior customer service, we are each proud of where we've been and look to the future confident that we will be better together. Scott and I look forward to working together as we lead our combined companies to an even higher level of construction quality, customer satisfaction and operational excellence."
Complementary Price Points and Geographies
The combination of Standard Pacific and Ryland will offer well-crafted homes in thoughtfully designed communities that meet the desires of customers across the homebuilding spectrum, from entry level to luxury, in 41 MSAs spanning 17 states. This powerful price point and geographic diversity positions the combined company to gain combined efficiencies, while mitigating risk against changes in consumer sentiment and significantly reducing the potential impact of a downturn in any particular geography.
Efficiencies and Cost Savings
It is currently anticipated that production, purchasing and other synergies from the announced transaction could result in annual cost savings of between $50-$70 million. The combined company expects to realize a significant portion of the estimated cost savings by late 2016.
Management, Board and Corporate Presence
Upon completion of the transaction, Mr. Stowell will assume the position of Executive Chairman of the newly formed Board of Directors and Mr. Nicholson will assume the position of President and Chief Executive Officer. Current Ryland Chief Operating Officer, Peter Skelly, and current Standard Pacific Chief Financial Officer, Jeff McCall, will serve in these roles for the combined company. Current Ryland Chief Financial Officer Gordon Milne will retire in connection with the transaction, after assisting with the integration of the two companies.
The board of directors of the combined company will consist of 10 persons, five of which (including Mr. Stowell) will be current Standard Pacific directors and five of which (including Mr. Nicholson) will be current Ryland directors. William Jews, current Chairman of the Board of Ryland, will serve as the combined company's lead independent director. Ronald Foell, co-founder and Chairman of the Board of Standard Pacific, will retire at the time of closing, which happens to coincide with the company's 50th anniversary, a remarkable milestone for Mr. Foell. A final roster of directors will be announced in conjunction with the closing of the merger.
To ensure a successful transition, an integration committee will be formed and will be headed by Mr. Stowell.
The combined company plans to operate as one brand and will announce its new name prior to the closing of the transaction. Currently both companies' headquarters are located in Southern California -- Standard Pacific in Irvine and Ryland in Westlake Village. Given the size of the combined company, within the next two years the combined company expects to develop a corporate presence on the east coast, while continuing to maintain a corporate presence in California.
Approvals and Timing
The transaction is subject to approval by Standard Pacific and Ryland shareholders. MP CA Homes LLC, Standard Pacific's largest stockholder and an affiliate of MatlinPatterson Global Advisers LLC, has agreed to vote its shares in favor of the transaction. The merger is expected to be completed in early Fall 2015, subject to the timing of the Securities and Exchange Commission review of the required prospectus and other stockholder related documents. The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.