NEW YORK (TheStreet) -- Shares of Standard Pacific (SPF) were gaining 5.7% to $8.84 Monday morning after the company announced it will merge with competitor homebuilder Ryland (RYL).

Shares of Ryland were gaining 5.7% to $45.22 following the merger announcement.

The companies said the merger of equals will create the fourth largest homebuilding company in the U.S. after D.R. Horton (DHI), Lennar Corp. (LEN) and PulteGroup (PHM). the combined company will have an equity market capitalization of about $5.2 billion and an enterprise value of about $8.2 billion.

At the time of the merger Standard Pacific will implement a 1 for 5 reverse stock split so five shares of Standard Pacific will be combined into one share. After the reverse stock split Ryland shareholders will receive 1.0191 shares of Standard Pacific for each share of Ryland they own.

Standard Pacific shareholders will hold about 59% of the combined company with Ryland shareholders holding the remaining 41%.

"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," Standard Pacific President and CEO Scott Stowell said. "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."

Ryland CEO Larry Nicholson will become President and CEO of the combined company. 

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