Range Resources shares stumble after merger announcement

Shares of Range Resources fell more than 10 percent Monday after the company announced it would acquire a rival.

The company said on Monday it would buy fellow oil and gas producer Memorial Resource Development for about $3.3 billion, excluding debt, at a time when mergers among energy companies are few and bankruptcies are on the rise.

Range Resources traded at $37.69 a share mid-day Monday. Shares of Memorial Resource Development were up about 3 percent at $13.86.

Workers walking along tanks at gas plant
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Workers walking along tanks at gas plant

The deal will boost Range Resources' natural gas assets in the Appalachian and the U.S. Gulf Coast regions. Natural gas already accounts for 71 percent of the company's total production.

Natural gas demand is on the rise. Consumption of natural gas worldwide is expected to increase to 203 trillion cubic feet in 2040 from 120 trillion cubic feet in 2012, according to the U.S. Energy Information Agency (EIA).

A near 60 percent fall in oil prices since mid-2014 have also led oil and gas companies to look for ways to cut expenses and increase profits.

Memorial Resource Development's shareholders will receive 0.375 of a Range Resources share for each share they hold, the companies said.

The all-stock deal is valued at $15.75 per share, a 17 percent premium to Memorial Resource Development's Friday close. Including the assumption of $1.1 billion in debt, the deal is valued at $4.4 billion.

Memorial Resource Development's shareholders are expected to own about 31 percent of Range Resources after the close of the deal, expected in the second half of the year.

Memorial Resource Development will also have the right to nominate an independent director to Range Resources' board.

Credit Suisse Securities (USA) was financial adviser to Range Resources, while Sidley Austin was its legal adviser.

Morgan Stanley and Barclays Capital were Memorial Resource Development's financial advisers and Vinson & Elkins and Akin Gump Strauss Hauer & Feld were its legal advisers.

— CNBC's Anita Balakrishnan contributed to this report.