The oil and gas industry’s latest merger and acquisition move involved Brigham Minerals, Inc. of Austin, Texas and Sitio Royalties of Denver. The two announced their all-stock merger in a deal valued at nearly $4.8 billion.
The combination brings together two of the largest public companies in the oil and gas mineral and royalty sector with
complementary high-quality assets in the Permian Basin and other oil-focused regions. It means the new company will be what the firms described as a “premier consolidator” in the fragmented minerals space.
The deal will result in 259,510 net royalty acres with second quarter net production of 32.8 Mboe/d and 50.3 net line-of-sight wells.
The two firms indicated that their combined company will benefit from a step-change in greater scale, enhanced margins and increased access to capital. The transaction is also expected to generate nearly $15 million of annual operational case.
As a result of the merger, the board of directors will consist of 9 total directors including 5 directors nominated by Sitio and 4 by Brigham. Noam Lockshin, the current Chairman of Sitio’s board will serve as Chairman of the Board of the combined company. Current Sitio management will run the combined company which will also retain the Sitio Royalties Corp. company name.
Under the terms of the definitive merger agreement, Brigham shareholders will receive a fixed exchange ratio of 1.133 shares of common stock in the combined company for each share of Brigham common stock owned on the closing date, and Sitio’s shareholders will receive one share of common stock in the combined company for each share of Sitio common stock owned on the closing date.
Brigham’s and Sitio’s Class A shareholders will receive shares of Class A common stock in the combined company, and Brigham’s Class B and Sitio’s Class C shareholders will receive shares of Class C common stock in the combined company as merger consideration.
Based on the exchange ratio and the closing price of Sitio’s Class A common stock on September 2, 2022, the combined company
would have an aggregate enterprise value of $4.8 billion. Upon completion of the transaction, Sitio shareholders will own approximately 54.0% and Brigham shareholders will own approximately 46.0% of the combined entity on a fully diluted basis.
The transaction has been unanimously approved by the boards of directors of both companies. Funds managed by Kimmeridge, Blackstone and Oaktree, which own 43.5%, 24.8% and 15.4% of the outstanding shares of Sitio, respectively, have entered into support agreements to vote in favor of the transaction