US-based pure-play mineral and royalty company Sitio Royalties has signed a definitive agreement to acquire Brigham Minerals in an all-stock deal valued at around $4.8bn.

The two companies hold complementary assets in the Permian Basin and other active oil-producing regions in the US, and the merger will consolidate their interests.

Under the terms of the merger deal, Brigham shareholders will to receive 1.133 shares of the combined company, in exchange for each share of Brigham common stock held.

Sitio’s shareholders would receive one share of the combined company, for each share of Sitio common stock held, upon closing.

The combined company’s enterprise value of $4.8bn is finalised based on fixed exchange ratio, and the exchange ratio and the closing price of Sitio’s shares as of 2 September 2022.

Sitio chief executive officer Chris Conoscenti said: “Our merger with Brigham Minerals brings together two complementary businesses that are aligned in every keyway, and further advances the business plan that Sitio outlined earlier in the year following the merger of Sitio’s predecessor companies.

“Both companies are focused on asset quality, maintain disciplined acquisition underwriting standards, understand the benefits of scale, and prioritise shareholder alignment in our approaches to capital allocation and best-in-class governance.

“We believe that achieving material scale in this industry is critical to creating sustained value for our stakeholders and distinguishing Sitio from others, which is why we have been so focused on employing a differentiated, large-scale consolidation strategy.”

The transaction is expected to be completed in the first quarter of 2023, subject to customary closing conditions, including regulatory and shareholder approvals.

Upon closing of the transaction, Sitio shareholders will own around 54% and Brigham shareholders 46% of the combined company, on a fully diluted basis.

The merger has been unanimously approved by the boards of directors of both companies.

Funds managed by Kimmeridge, which owns 43.5%, Blackstone with 24.8% and Oaktree with 15.4% of the Sitio shares, have agreed to vote in favour of the transaction.

In relation to the merger, Sitio chairman and Kimmeridge partner Noam Lockshin will be appointed as the chairman of the combined company.

Brigham chief executive officer Robert M Roosa said: “I’m extremely proud of the Brigham team’s incredible efforts over the past 10 years to assemble an outstanding portfolio of diversified mineral interests across four of the highest quality oil-weighted basins under high performing, active operators.

“Our merger with Sitio creates the industry-leading powerhouse in the minerals space with over 30% coverage in the Permian Basin, approximately 100 rigs running across all of our operating basins and greater than 50 activity wells to continue to drive production and cash flow growth.

“We believe the merger is the logical next step in the continued evolution of the minerals space and creates an entity of scale with ever improving liquidity and float, as well as a streamlined cost structure that further reinforces the scalability of our industry.”

Credit Suisse Securities (USA) served as exclusive financial advisor and Davis Polk & Wardwell as legal advisor to Sitio, on this transaction.

Also, Goldman Sachs & Co. served as exclusive financial advisor and Vinson & Elkins is as the legal advisor to Brigham.