What Happened?
Shares of energy and industrial distributor DistributionNOW (NYSE: DNOW) jumped 9.8% in the morning session after the company announced it will merge with MRC Global in an all-stock transaction. The deal will create a leading energy and industrial solutions provider with a combined enterprise value of approximately $3.0 billion.
Under the terms of the agreement, MRC Global shareholders will receive 0.9489 shares of DNOW common stock for each share of MRC Global they own. Upon closing, DNOW shareholders will own approximately 56.5% of the combined company, with MRC Global shareholders owning the remaining 43.5%.
The merger is expected to generate significant value for shareholders, with an estimated $70 million in annual cost savings within three years. The combination is also projected to be accretive to adjusted earnings per share in the double-digits within the first year after the deal is finalized.
This strategic move combines the complementary footprints of both companies across key energy and industrial centers in the United States.
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What The Market Is Telling Us
DistributionNOW’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 20.3% on the news that the company reported strong fourth-quarter results, significantly surpassing analysts' sales, EPS, and EBITDA estimates. The company also doubled the size of its share repurchase program to $160m, highlighting the focus on returning value to shareholders. Zooming out, we think this quarter featured some important positives.
DistributionNOW is up 25.4% since the beginning of the year, and at $16.24 per share, it is trading close to its 52-week high of $17.59 from February 2025. Investors who bought $1,000 worth of DistributionNOW’s shares 5 years ago would now be looking at an investment worth $1,895.
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