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US: Range Resources buying Memorial in rare energy $ 3.3bn merger

 |  May 16, 2016

Range Resources Corp. said on Monday it will buy fellow natural gas producer Memorial Resource Development Corp. for about $3.3 billion in stock, at a time of almost no mergers and a rising tide of bankruptcies in the energy sector.

The deal combines Range’s prime natural gas resources in Appalachia with Memorial’s assets in Louisiana, which has ample pipeline connections to the Gulf Coast and its growing liquefied natural gas export plants.

Hefty debt loads and disagreements over valuations between buyers and sellers have stymied scores of potential mergers since oil and gas prices tumbled in mid-2014, but this deal was reached thanks to Memorial’s light debt load and strong hedge book that allows it to sell gas at above spot market prices.

The deal will markedly add to Range’s cash-flows and improve its bottom line, while improving its credit profile.

“In contrast to significant dilutive asset sales or equity dilution, this merger looks like an inventive solution,” analysts at Sanford C. Bernstein said in a note to clients.

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