Kimbell Royalty Partners LP (NYSE: KRP) said May 29 it agreed to acquire the mineral and royalty interests held by Houston-based Haymaker Minerals & Royalties LLC and Haymaker Resources LP for about $404 million in cash and stock.

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Founded in 2013, Haymaker has invested capital on behalf of KKR & Co. LP and Kayne Anderson Capital Advisors LP to acquire more than 5 million gross mineral acres through over 700 individual transactions according to the company press release.

In total, Haymaker assembled a diversified portfolio of mineral and royalty interests in more than 35,000 producing wells across 26 states and over 500 counties.

Kimbell said 52% of the combined net royalty acreage is in the Permian Basin and Midcontinent areas, including mineral interests in the Midland Basin and Scoop/Stack plays. Kimbell also proposed election to change tax status from pass-through partnership to a taxable entity.

"We are extremely proud of the Haymaker team for assembling this world-class portfolio," Karl Brensike, CEO of Haymaker, said in a statement.

"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. Kimbell's diversified asset base and access to capital through their proposed tax structure will position them to continue to make accretive acquisitions over the coming years," Brensike added.

Following the closing of the acquisition, Kimbell will have an 11.1 million gross acre position with a total of 73 active rigs on its properties, which represents 7% of total active rigs in the U.S. In addition, 95% of all rigs in the Lower 48 are located in counties where Kimbell will hold mineral interest positions.

Kimbell's management team, led by Kimbell Chairman and CEO Bob Ravnaas, will operate the combined company following the closing.

Ravnaas said in a statement, "This is a transformative acquisition for our company which we expect to deliver significant value and benefits through both increased scale and significant operating leverage that will drive improved profitability. Through this combination of highly complementary minerals portfolios, Kimbell is uniquely positioned to be a major participant in the best-performing, highest-growth oil and gas basins in the Lower 48. We expect the acquisition to be immediately accretive to distributable cash flow per unit and look forward to continued successes in this new and exciting chapter for Kimbell."

The acquisition is expected to also boost Kimbell's average daily net production by more than 50% on a per unit basis and generates estimated G&A savings of 50% per barrel of oil equivalent on a run-rate basis.

Going forward, Kimbell will remain a liquids-focused company with oil and NGL accounting for about 67% of estimated pro forma first-quarter 2018 production, according to the company press release.

The purchase price for the acquisition is comprised of $210 million in cash and 10 million common units of Kimbell valued at about $194 million.

Kimbell plans to finance the cash portion of the purchase price through a $110 million private placement of preferred units to an affiliate of Apollo Global Management LLC and through borrowings under a new revolving credit facility.

In conjunction with the closing of the acquisition, Kimbell has received commitments for the fully-underwritten $200 million revolving credit facility with Frost Bank, Wells Fargo Bank and Credit Suisse AG. At the closing, the company will have about $64 million of availability under its new revolving credit facility.

The effective date of the acquisition is April 1. The boards of Kimbell and Haymaker have unanimously approved the acquisition, which is expected to close in third-quarter 2018 subject to customary closing conditions.

Following the closing of the acquisition, Haymaker's private equity sponsors, KKR and Kayne Anderson, along with Haymaker management, will collectively own roughly 37% of the then outstanding common units of Kimbell.

Credit Suisse Securities (USA) LLC was exclusive financial adviser and sole placement agent on the preferred units to Kimbell and Baker Botts LLP was its legal counsel. UBS Investment Bank was exclusive capital markets adviser to Kimbell in connection with the election to change to a taxable entity.

RBC Richardson Barr was exclusive financial adviser to Haymaker. Kirkland & Ellis LLP was legal counsel to KKR and Haymaker. DLA Piper LLP was legal counsel to Kayne and Haymaker. Kirkland & Ellis LLP also represented Apollo in connection with the preferred units offering.