The analyst firm maintained its price target of $9.50 for the homebuilder.
Credit Suisse said it recognizes the "strategic reasoning" behind Standard Pacific's acquisition of Ryland (RYL), and appreciates "management's track record of execution." The firm's analysts wrote, "We believe that integration risk in combination with a relatively full valuation based on our initial pro-forma projections for earnings and book value create a less favorable risk/reward profile."
"When excluding purchase accounting and integration costs, our analysis suggests that the acquisition will be largely neutral to SPF EPS in '16 with accretion beginning in '17. We believe, however, that '16 EPS will be negatively impacted by ~$0.44 inclusive of purchase accounting (we est. a 110 bps GM headwind) and integration costs," the analysts continued
Insight from TheStreet's Research Team:
Standard Pacific is a part of David Peltier's Stocks Under $10 Portfolio. Here is what Dave had to say about the stock in a recent alert:
The deal is expected to close in the fall, at which time Standard Pacific will conduct a one-for-five reverse-stock split. After the split, Ryland investors will receive 1.0191 share, which will result in Standard Pacific shareholders controlling 59% of the combined company. Standard Pacific CEO Scott Stowell will be the executive chairman of the combined company. Ryland CEO Larry Nicholson will retain the same title.