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Investing.com -- Texas Capital has downgraded Sitio Royalties Corp (NYSE:STR) to Hold from Buy after the company agreed to be acquired by Viper Energy (NASDAQ:VNOM) in an all-stock transaction valued at $19.41 per share.
The downgrade comes as analysts no longer see material upside following the announced deal, which values Sitio at about $4.1 billion.
Texas Capital also cut its price target on Sitio to $20 from $29, in line with the proposed merger terms.
“We are positive on the transaction,” analysts wrote, citing strategic fit, increased scale, low leverage, and an attractive base dividend breakeven below $20 per barrel WTI.
“The combination creates a must-own Minerals company.”
Texas Capital does not expect any competing bids given the lack of well-capitalized public rivals in the space.
Viper Energy said the deal will make it the largest public mineral and royalty company in the U.S., with positions in the Permian and other key basins.
The transaction is expected to close in the second half of 2025, subject to shareholder and regulatory approvals.