Range buys Memorial Resources

[ddlopata084]

Range Resources to buy Memorial Resource for $4.4B
Range Resources (RRC) and Memorial Resource (MRD) announced a definitive merger agreement under which Range will acquire all of the outstanding shares of common stock of MRD in an all-stock transaction valued at $4.4B. This valuation includes the assumption of MRD's net debt, which was $1.1B as of March 31, 2016. Under the definitive agreement, MRD shareholders will receive 0.375 shares of Range common stock for each share of MRD common stock held. Based on the Range closing price on May 13, 2016, the transaction has an implied value to MRD shareholders of $15.75 per share, representing a 17% premium to the closing price of MRD stock. Following the transaction, shareholders of MRD are expected to own approximately 31% of the outstanding shares of Range. MRD will have the right to nominate an independent director from MRD to a seat on Range's Board. The boards of both companies have unanimously approved the terms of the agreement, and have recommended that both shareholder groups approve the transaction. Completion of the transaction is subject to the approval of the respective companies' shareholders, certain regulatory approvals and customary closing conditions. The transaction is expected to close in the second half of 2016.

[mkarpoff]

I wonder if this has any effect on MEMP?

[dan_s]

The deal will combine Memorial’s focus on natural gas and oil exploration and development in North Louisiana with Range’s focus on the Appalachian Basin.

"This is an exciting announcement that brings together two high-quality unconventional producers with large de-risked, high-return projects into one portfolio,” Range Resources CEO Jeff Ventura said in the companies’ statement. “This acquisition will give Range strategic positioning in both the Appalachian and Gulf Coast regions, providing greater marketing capabilities and opportunities, with added beneficial exposure to growing natural gas demand.”

Memorial had 484 employees as of Dec. 31, and Range had 744 full-time employees as of Jan. 1.

Credit Suisse Securities (USA) LLC acted as exclusive financial adviser, and Sidley Austin LLP was the legal adviser to Range. Morgan Stanley & Co. LLC and Barclays Capital Inc. acted as financial advisers, and Vinson & Elkins LLP and Akin Gump Strauss Hauer & Feld LLP were the legal adviser to Memorial Resource Development and Natural Gas Partners, respectively.

[dan_s]

Regarding MEMP

After the merger of RRC and MRD, RRC will own 100% of the General Partner who runs MEMP, an upstream MLP. They will also own 50% of the IDRS.

IMO this is great news for MEMP unitholders. RRC should have more high quality producing assets to drop down into MEMP.

[ChuckGeb]

Actually MRD recently announced the divestiture of the GP interest in MEMP including the IDR's. A few months ago the CEO of MRD left to become the CEO of MEMP. I guess this has been in the works for a bit. MRD has some incredible acreage close to the GUlf Coast markets. No waiting on approvals for infrastructure. Sounds like a very positive deal for Range. RJ had a $20 target price for MRD close to what their IPO traded at. They have a great hedge book.

[dan_s]

Thanks for correcting me. I now recall seeing that news.

RRC is a great company with a first class management team. IMO the market overreacts to these deals (selling off the buyer). Obviously, RRC's team did a lot of due diligence on MRD before deciding to pull the trigger on it. The assets MRD has in East Texas are world class gas reserves. RRC has some of the best engineers in the business that know how to develop gas reserves. RRC also has one of, if not the best marketing group. They will get top dollar for the production.