Sitio Royalties Corp stock soars on acquisition by Viper Energy

Investing.com -- Shares of Sitio Royalties Corp (NYSE:STR) surged 10.3% following the announcement that Viper Energy (NASDAQ:VNOM), Inc., a subsidiary of Diamondback (NASDAQ:FANG) Energy, Inc., will acquire the company in an all-equity transaction valued at about $4.1 billion. The deal, which includes Sitio’s net debt of approximately $1.1 billion as of March 31, 2025, was unanimously approved by the boards of both companies and is expected to close in the third quarter of 2025.

The acquisition is seen as a strategic move to create a leading entity in the North American mineral and royalty space, with Viper acquiring approximately 25,300 net royalty acres in the Permian Basin from Sitio, among other assets. Viper’s board also approved a 10% increase to its base dividend to $1.32 per share annually, signaling confidence in the transaction’s potential to drive shareholder value.

The transaction is anticipated to be 8 - 10% accretive to cash available for distribution per Class A share immediately upon closing. Moreover, the deal is expected to lower pro forma Viper’s base dividend breakeven by about $2 per barrel to under $20 WTI, while the increased dividend represents approximately 45% of cash available for distribution at $50 WTI.

Viper’s CEO, Kaes Van’t Hof, highlighted the significance of the transaction, stating that the combination of Viper and Sitio marks an important moment for mineral and royalty interests, creating a must-own public mineral and royalty company with substantial size and scale in the Permian Basin.

Sitio’s CEO, Chris Conoscenti, also expressed enthusiasm for the merger, emphasizing the benefits for Sitio’s shareholders, including exposure to an entity with greater size, future development visibility, and the economies of scale unique to the minerals business. The transaction is expected to position the combined company for strong performance in the Permian Basin for years to come.

The financial advisors for the transaction are Moelis (NYSE:MC) & Company LLC for Viper and J.P. Morgan Securities LLC for Sitio, with legal advisors being Wachtell, Lipton, Rosen & Katz, and Vinson & Elkins LLP, respectively.

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