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Stock market reaction

The merger deal was approved by the shareholders of MRD at the special meeting which MRD had held earlier. At the meeting, approximately 87 percent of the outstanding shares of Range were voted & of those shares, the merger was approved by 98 percent.(Officials, Range Merger With Memorial Resource Development Corp. Receives All Required Stockholder Approvals, 2016). The stock prices of the bidder increased when the merger was announced, thus demonstrating the positive stock market reaction.

As evidenced by the stock price reactions of the firms involved in the merger, on the day of announcement of merger deal; the market capitalization of the combined company increased to $701484481, up from $135199415of previous day, thus showing an increased shareholder gain. Additionally, the reaction of the market regarding the merger is followed by an improved worth of the combined company on the open market and the market perception of its future prospects.

Stock price movements prior to the deal / performance of companies before and after merger

In the weeks prior to the announcement of the merger deal; there weren’t any movements in the prices of stock as the prices were fluctuating by $42 per share, which does not provide an evidence of merger deal to the investors.On the day of the announcement of the merger deal; the stock price of the company reduced to $37.69 per share because of the market premium that Range had to pay on the stock of the target company. Additionally, it is because of the reason that when a company intends to acquire another company; the price of acquiring company’s stock tends to dip temporarily, whereas in case of Range and MRD; the stock price of Range increased from $39.73 to $42.01 prior to the deal.

Managers of the firms involved acted in the interest of shareholders

The managers of the firm involved, acted in the best interest of the shareholders by making decisions that tend to increase the value of the stock. The manager of the company intended to maximize the current value per share by valuation of the merger, including comparable translation analysis, comparable company analysis and the net asset valuation analysis. Additionally, the reasons due to which the board of directors of Range were in best interest of Memorial and its stakeholders included the fact that the combined company would have a core acreage position in northern Louisiana and Appalachia and each of Memorial, and Range would employ the strategy of the improved returns, reduced cost and increased cash flows. Additionally, the managers of the firms involved, acted in the interest of shareholders by maximizing the shareholder’s wealth through creating sustainable shareholder value, improving the class-leading cost structure and driving marketing and operational efficiencies.

Post-merger deal performance of public companies

After merger with MRD, the financial performance of Range has improved, as the revenues have increased, i.e. from $261103000 in 2017 and $3282645000 in 2018. Also, the merger deal has also reduced the debt to capital ratio of Range, from 50 percent to 37 percent and it has cut the debt to EBITDA ratio from 4.8 times to 3.5 times.The decision of merger has also provided the opportunity of optimizing the capital spending between areas, in order to maximize the returns. The Proforma cash flows of the company have increased to $780 million, up from $375 million before merger, thus increasing it by 108 percent (Officials, 2016). Additionally, the company has become one of the largest players in Appalachia, having some of the best acreage. Furthermore, the company is well-positioned in the market to grow its production, as demand for the natural gas surges over the period of time. The stock of the company has substantially performed in the market as compared to its peers, representing the strong financial performance of the company.(Officials, Range Resources: Good Company But Stock May Have Gotten Ahead Of Itself, 2020 ).

Reviews and Recommendation

The decision of buying MRD is in favor of the company’s financial and non-financial position. Also, the merger deal is resultant in immediate credit and cash flow secretive enhancing and the combination of two low-cost producers of gas has exploited the opportunities for driving costs lower, increasing the cash flows as well as improving the return and creating the shareholder’s value. In order to remain in the market; the company is advised to expand its business operations in the international markets and to use large reserves to boost the production in case the demand for the natural gas increases in the market......................

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