Diversified Royalty Corp. Announces Incremental Royalty Purchase from Cheba Hut

Executive Summary

• Diversified Royalty Corp. (DIV) purchased an incremental royalty stream from Cheba Hut Franchising, Inc. for US $7.2 million, representing an annualized royalty of US $0.9 million.
• The transaction adds a fixed monthly royalty of US $75,000 to DIV’s existing Cheba Hut royalty payments beginning April 2026, with future adjustments tied to the greater of 3.5% or U.S. CPI + 1.5% per year.
• The acquisition is intended to be accretive to cash flow per share and supports DIV’s objective of growing predictable royalty income and maintaining stable dividends.

Key Details

• Purchase Price: US $7.2 million paid in cash to acquire the incremental royalty.
• Royalty Amount Acquired: US $75,000 per month (US $0.9 million annualized).
• Incremental Royalty Structure:
• Minimum increase of US $500,000 per annum; increments above this threshold must be in US $100,000 steps.
• On each “Adjustment Date” (April 1st annually), the royalty payable by Cheba Hut will automatically increase at the greater of 3.5% or U.S. CPI + 1.5% per year, with no additional consideration required from DIV.
• Effective Date: April 1, 2026 – the incremental royalty is added to the regular monthly royalty starting with the April 2026 payment.
• Strategic Rationale (CEO Quote): “Cheba Hut has continued to grow… we look forward to working with Scott and Cheba Hut’s management team to continue expanding the business across the U.S.” – Sean Morrison, CEO.
• Impact on DIV: Expected accretion to cash flow per share; supports DIV’s goal of increasing predictable royalty streams and sustaining/raising its monthly dividend.

Notable Quotes

“Cheba Hut has continued to grow since being first added to DIV’s portfolio of royalty partners in June 2025… we look forward to working with Scott and Cheba Hut’s management team to continue expanding the business across the U.S.” – Sean Morrison, Chief Executive Officer, Diversified Royalty Corp.