Barclays notes that Viper Energy (VNOM) announced an all-equity acquisition of Sitio Royalties (STR) for $4.1B, including assumption of $1.1B of net debt and implying a 12% premium to yesterday’s close. The transaction would reduce Viper Energy exposure to FANG-operated Permian acreage to 43% and take leverage to 1.0-turn but would come with significant implied free cash flow accretion at strip, supporting the increase in base dividend. Barclays says Viper Energy is playing offense, leveraging its strong balance sheet and equity valuation for free cash accretion, while Sitio Royalties would get to exit at a premium under the premier public company in the royalty space. The firm has an Equal Weight rating on Sitio Royalties and an Overweight rating on Viper Energy.
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