M&A In Energy Industry Case Study Solution
Structural Aspects of the Deal
For each MRD Ordinary Share held, the shareholders of MRD will receive 0.375 shares of the Range Resources Corporation (RRC) Share. Based on the adjusted closing price (Adj. Close) of the Range on 13 May, 2016, the implicit transaction value of the shareholders of MRD is 15.75 dollars per share, representing a premium of 17% of the closing share price by MRD. Upon completion of the transaction, MRD has the right to appoint independent MRD directors as members of the Range’s Board of Directors. The two boards unanimously approved the terms of the agreement. The transaction is closed in the second half of 2016 after normal approval.
Range CEO Jeff Ventura concluded in a press release that the transaction "combines two high-quality, unusual producers with large, risk-free, high-return projects in an investment portfolio(Pulsinelli, 2016)."
On September 16, 2016, Range Resources Corporation (NYSE: RRC) and Memorial Resource Development Corp. (NASDAQ: MRD) entered into a merger agreement, and an agreement has already been reached with shareholders of both companies. Under the agreement, RRC acquired all the remaining ordinary shares in MRD. The total value of the deal exceeds $ 4 billion, including MRD’s net debt(Range Resources Corporation, 2016).
Perceived Value Creation
Ken Settles, Managing Partner at Sailing Stone, said: “Range is an excellent company with high quality assets, a strong management team, excellent operating results and exciting long-term prospects. deals with oil and gas production. and new directors with independent financial experience will expand and further strengthen the board. In addition, we are encouraged by the improved incentive compensation plan and the new capital program. As the largest shareholder in the Range, we look forward to continuing to support Range’s board and management once the transaction is completed and the company’s future success has been established(Network News Wire, 2016)."
Jeff Ventura, CEO of Range Resources, said that Sailing Stone is very interested in the long-term success of the merged company. Our contract with Sailing Stone reflects our shared commitment to full reach. "The value-creating potential of the expanded resource base. We look forward to working with them to find new, highly qualified independent directors whose skills and experience complement our representatives in a strong body(Network News Wire (NNW), 2016)."
Share Price Movement
The share price of the company (RRC) after the merger or acquisition of MRD on 16thSeptember 2016,has severely declined. The share price before the day of the announcement of the merger and acquisition has declined as compared to its previous day price, which was higher than the after-merger price. The price after the day of merger increased, but after that it started to decline and the decline is much larger than it was before the merger’s price.
Range Resources Corporation’sShareholders
Shareholders of Range Resources Corp. (NYSE: RRC) and Memorial Resource Development Corp. (Nasdaq: MRD) have approved the acquisition of Fort Worth-based Houston Memorial. The transaction is now closed on September 16th.
Of the shareholders voting at the extraordinary meeting of each company, approximately 99.3% of Range shares and approximately 98% of Memorial shares voted in favor of the merger. The entire stock transaction was announced in May and has a total value of $ 4.4 billion, including a hypothetical $ 1.1 billion net debt to Memorial to Range.
For each MRD, Memorial shareholders will receive 0.375 Range common stock. As of May 13, each stock is valued at $ 15.75, a 17% premium over MRD’s May 13 closing price.
Upon completion of the transaction, Memorial’s shareholders will own approximately 31% of RRC’s outstanding shares and will have the right to appoint an independent director of Memorial to serve on the Board of Directors of Range.
The transaction commemorates the concentration of natural gas and oil exploration and development in northern Louisiana and the concentration of Lange in the Appalachian Basin. On December 31, Memorial employed 484 full-time employees and on January 1, Range employed 744 full-time employees.................
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