© 2015 The Texas Lawbook.
By Natalie Posgate
(May 16) – Fort Worth-based Range Resources broke two company records today when it announced its merger agreement with a fellow independent oil and gas company, Houston-based Memorial Resource Development.
The $4.4 billion all-stock purchase of MRD is both the largest deal Range has ever done and its first public deal in about a decade, according to Range General Counsel David Poole.
The transaction, which includes an assumption of $1.1 billion in net debt, involves a slew of Texas lawyers. Sidley Austin represents Range and Vinson & Elkins represents MRD, which is a portfolio company of private equity firm Natural Gas Partners. Akin Gump Strauss Hauer & Feld represents NGP, and Baker Botts is advising Barclays Capital, which is serving as NGP’s financial advisor.
Poole said the lawyers at Sidley and V&E were “key to getting this deal done.
“There were obstacles that arose, as they do in every large deal, that were resolved because of the great work of the lawyers at Sidley and V&E,” Poole said.
Leading the Sidley deal team were Houston corporate partners Kevin Lewis and Mark Metts.
“Because this is such a large deal for Range, I knew our board of directors needed outside counsel to lean on and have confidence in,” Poole said. “Kevin Lewis represents our board annually on evaluation matters and Mark Metts represented Range on deals before I came here as GC.”
Though energy M&A has been off to a sluggish start this year, lawyers leading this merger say they feel good about this one closing and are hopeful the climate will pick up.
“People have been predicting the coming wave of M&A, but for that to happen, there has to be enough price stability for the buyer and seller to come together,” Lewis said. “This deal may turn out to be an anomaly, but I doubt it.
“There’s enough stability in the market, particularly in a stock-for-stock deal, where folks can agree on a relative value and hope to ride the market up together and turn it around,” Lewis added. “These transactions have their own ripple effects in the market. It may be a signal to others that stability is there.”
Steve Gill, one of the lead lawyers for MRD, said unlike some of the megadeals that occurred last year that fell through, this deal should hopefully close “late September or early fall.
“I don’t think we’re going to see many so many megadeals like there were last year,” said Gill, who co-led V&E’s deal team with fellow Houston partner Doug McWilliams. “I think you’ll see a lot of companies that are three or four times the size or maybe double the size of the company they’re buying” and doing it because “it makes strategic sense and was a right fit.”
In this instance, Gill said it was a right fit on both sides because it allows Range, which is seeking to improve its balance sheet, acquire a company in good financial standing that will improve Range’s cash flow and EBITDA while also being an “enhancement for future performance.” For MRD, it is an opportunity to join a company with “premier assets” in the “prolific area” of the Marcellus shale.
“It’s one our board was enthusiastic about,” Gill said. “It gives MRD an option to get a little premium for its stockholders and also become a part of a larger enterprise that is well-built for future growth.”
MRD GC Kyle Roane said the company has a “long-standing” relationship with V&E and knew McWilliams from his work as underwriters’ counsel to some of MRD’s stock offerings as well as MRD’s master limited partnership, Memorial Production Partners.
“Doug and Steve’s representation speaks for itself,” Roane said. “They’re incredibly sophisticated M&A lawyers, and we think very highly of them. They know the business.”
The rest of V&E’s corporate deal team included associates Benji Barron, Atma Kabad, Mike Marek, Brett Riesenfeld, Shauna DiGiovanni, Andrew Klein and Ryan Martin.
V&E partners that advised on other matters included John Lynch (tax), Larry Nettles (environmental) Sean Becker (labor & employment) and Mike Harrington (capital markets/high yield debt) in Houston and David D’Alessandro (executive compensation/benefits) in Dallas. Additional associates included Missy Spohn and Dario Mendoza in Dallas and Brandon Tuck and Christine Mainguy in Houston.
In addition to Lewis and Metts, the rest of the Sidley M&A deal team included Houston associate Atman Shukla and Dallas associate Jamil Bata. Other Texas Sidley attorneys involved in the deal included tax partner Tim Devetski and associate Omair Khan,corporate reorganization and bankruptcy partner Duston McFaul and banking and financial services Kelly Dybala, all of whom are based in Sidley’s Houston office, except for Dybala, who is based in the firm’s Dallas office.
Attorneys from the firm’s Chicago and Los Angeles offices advised on bankruptcy, environmental, antitrust and employee benefits matters.
At Range, Deputy GC David Goldberg was also “instrumental” to getting the deal done in addition to Poole, Lewis said.
NGP turned to oil and gas partner John Goodgame of Akin Gump’s Houston office to lead its end of the deal. The Akin Gump deal team also included associates Heather Ashour and Erik Shoemaker, who are also based in the firm’s Houston office.
Last year, Goodgame and Ashour represented NGP in its involvement in Vanguard Natural Resources’ $614 million acquisition of Eagle Rock, which NGP owns a 35 percent stake in.
Roane explained that he often uses Goodgame as MRD’s primary counsel, but Akin Gump was conflicted out of this particular transaction for its role representing NGP.
“We think very highly of Akin Gump, and John Goodgame is an exceptional lawyer,” he said.
Last February, Goodgame represented MRD when it exchanged its East Texas and non-core Louisiana properties for all of Memorial Production Partners’ interests in the Terryville Field in North Louisiana for approximately $78 million.
Barclays turned to Houston partner Josh Davidson of Baker Botts to lead its end of the deal, who received assistance from associate Carina Antweil.
Barclays’ deal team was also Houston-based. It included Greg Pipkin, co-head of Barclays’ U.S. oil & gas team; Chris Watson, head of natural resources M&A; director Jason Kivett; vice presidents Jose Briceno and Kyle Mitchan; and associates Alex Forshey.
Baker Botts is not new to representing Barclays in significant mergers. Two years ago, Baker Botts represented Barclays when it served as Exelon’s financial advisor in its $6.8 billion acquisition of Pepco Holdings. Baker Botts also represented Barclays when it served as financial advisor to Wisconsin Energy in its $9.1 billion purchase of Integrys Energy Group. That deal closed last June.
The investment bank teams for the other parties in the Range-MRD merger were also Houston-centric. Managing directors Tim Perry and Osmar Abib of Credit Suisse represented Range, as well as Co-head of Global M&A Greg Weinberger, who is based in New York. MRD turned to managing directors John Bishop and Jonathan Cox of Morgan Stanley for financial advice.
Both Range’s and MRD’s boards of directors have unanimously approved the terms of the deal, and have recommended that both shareholder groups do the same.
Range has operations focused in stack-play projects in the Appalachian Basin. MRD focuses on the acquisition, exploration and development of oil and gas assets in North Louisiana.
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