In the low-redshift Universe, the most powerful radio sources are often associated with gas-rich galaxy mergers or interactions. We here present evidence for an advanced, gas-rich (`wet) merger associated with a powerful radio galaxy at a redshift of z~2. This radio galaxy, MRC 0152-209, is the most infrared-luminous high-redshift radio galaxy known in the southern hemisphere. Using the Australia Telescope Compact Array, we obtained high-resolution CO(1-0) data of cold molecular gas, which we complement with HST/WFPC2 imaging and WHT long-slit spectroscopy. We find that, while roughly M(H2) ~ 2 x 10$^{10}$ M$_{odot}$ of molecular gas coincides with the central host galaxy, another M(H2) ~ 3 x 10$^{10}$ M$_{odot}$ is spread across a total extent of ~60 kpc. Most of this widespread CO(1-0) appears to follow prominent tidal features visible in the rest-frame near-UV HST/WFPC2 imaging. Ly$alpha$ emission shows an excess over HeII, but a deficiency over L(IR), which is likely the result of photo-ionisation by enhanced but very obscured star formation that was triggered by the merger. In terms of feedback, the radio source is aligned with widespread CO(1-0) emission, which suggests that there is a physical link between the propagating radio jets and the presence of cold molecular gas on scales of the galaxys halo. Its optical appearance, combined with the transformational stage at which we witness the evolution of MRC 0152-209, leads us to adopt the name `Dragonfly Galaxy.