Mineral royalty firm buys a rival

Houston firm Haymaker Minerals & Royalties has agreed to sell itself to Texas rival Kimbell Royalty Partners in a $404 million cash-and-stock deal.

Haymaker, founded five years ago, is backed by two major equity firms, Kayne Anderson Capital Advisors of Los Angeles and KKR of New York, which will acquire ownership stakes in Kimbell through the deal.

The deal represents the further consolidation of energy companies operating in U.S. shale oil and gas plays, especially in West Texas’ booming Permian Basin. This acquisition involves firms that generate much of their revenues from royalties on acreage leases after buying the minerals rights from property owners.

The sale includes $210 million in cash and the balance in stock. Kayne Anderson, KKR and Haymaker’s management will own a 37 percent stake in Kimbell once the deal closes in the fall.

Haymaker CEO Karl Brensike said he believes the minerals and royalties business is just starting to get recognition as a lower-risk strategy in the cyclical oil and gas sector.

“We believe this acquisition will kick off a new phase of consolidation across the sector, as private equity looks to divest their mineral interests to longer term holders,” Brensike said.

Fort Worth-based Kimbell, which became publicly traded last year, plans to switch from its tax-friendly master-limited partnership structure, which favors growth and passes on its income to investors, to a more traditional corporate structure.

Another private equity firm, Apollo Global Management, agreed to buy a $110 million stake in Kimbell to help finance the deal.