Robbins LLP: Acquisition of Memorial Resource Development Corp. (MRD) by Range Resources Corporation (RRC) May Not Be in Shareholders’ Best Interests
Robbins LLP are investigating the proposed acquisition of MRD (NASDAQ: MRD) by Range Resources Corporation (NYSE: RRC). On May 16, 2016, the two companies announced the signing of a definitive merger agreement pursuant to which Range Resources will acquire MRD. Under the terms of the agreement, MRD shareholders will receive 0.375 shares of Range Resources, the cash equivalent of $15.75, for each share of MRD common stock.
Is the Proposed Acquisition Best for MRD and Its Shareholders?
Robbins LLP’s investigation focuses on whether the board of directors at MRD is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $15.75 merger consideration represents a premium of only 17.1% based on MRD’s closing price on May 13, 2016. This premium is significantly below the average one day premium of nearly 35.7% for comparable transactions within the past five years. Further, the $15.75 merger consideration is significantly below the target price set by 15 analyst firms, for of which – Scotia Howard Weil Inc., Mitsubishi UFJ Securities USA, KLR Group, and Tudor Pickering & Co. – have set the target price for MRD at $23.00. In the last three years, MRD traded as high as $30.32 on September 3, 2014, and most recently traded above the merger consideration – at $15.78 – on February 1, 2016.
On May 10, 2016, MRD reported strong earnings results for its first quarter 2016. MRD reported increased average daily production 52% to 420 MMcfe/d for the first quarter 2016 compared to 277 MMcfe/d for the first quarter 2015. Adjusted EBITDA increased 23% to $106.4 million for the first quarter 2016 compared to $86.8 million for the first quarter 2015. Adjusted Net Income increased 22% to $21.5 million for the first quarter 2016 compared to the first quarter 2015. In commenting on these results, MRD Chief Executive Officer Jay C. Graham remarked, “I’m extremely proud of the achievements our team has made as we’ve consistently delivered industry leading returns quarter-after-quarter even during this challenging environment. We have continued to reduce MRD’s drilling and completion costs, post double digit year-over-year growth rates and improve liquidity, all while remaining within cash flow. This focus on optimizing cost structure, coupled with top tier well productivity, generates single well returns in excess of 100% at strip pricing.”
In light of these facts, Robbins LLP is examining MRD’s board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
MRD shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
MRD shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.