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Hesse Shareholders on Tuesday approved the pending acquisition of the New York-based oil company by Chevron for $53 billion, even as the deal’s timetable for closing has become increasingly unclear as the companies clash with Exxon Mobile.
A majority of Hess shares outstanding voted in favor of the merger agreement, although the company did not immediately provide a vote count. Hess’s shares changed little after the vote.
The pending deal is potentially threatened by Exxon’s claim to a right of first refusal over Hess’ assets in Guyana under a joint operating agreement that governs a massive offshore oil field called the Stabroek Block.
Hess owns a 30% stake in the Stabroek block, while Exxon leads the development with a 45% stake. China National Offshore Oil Corp. holds the remaining 25%.
Exxon filed for arbitration in March to defend its rights under the joint operating agreement. Chevron and Hess told investors the current deal would end if Exxon prevailed.
Hess said Tuesday that the deal’s completion depends on the resolution of the arbitration proceedings. The companies are working to complete the merger “as soon as possible,” according to Hess.
Before the vote, Hess shares were trading at around $152, meaning the trading spread has widened since the deal was announced. This suggests that some investors fear the deal is at risk.
Chevron has repeatedly argued that Exxon’s claims under the joint operating agreement do not apply to its acquisition of Hess.
“We are confident that our position on the right of first refusal will be upheld in arbitration and we are working to advance the process on this simple issue,” Chevron spokesman Bill Turenne said in a statement Tuesday. “We look forward to finalizing the transaction and welcoming Hess to our company.”
But Exxon CEO Darren Woods is confident his company will prevail in arbitration, telling CNBC in April that the oil major had drafted the deal.
The Chevron-Hess deal was initially expected to close in the first half of 2024, but that timeline was delayed due to the Exxon factor. Chevron CEO Mike Wirth told analysts on a conference call last month that Hess had asked the arbitration tribunal to issue a ruling in the fourth quarter, which should allow the companies to “close the transaction shortly After”.
Woods told CNBC in April that he expects the arbitration to extend into 2025. The CEO said Exxon has no plans to make a bid for Hess. Exxon is seeking to confirm its rights under the joint operating agreement and to learn the value placed on Hess’ assets in Guyana under the deal, Woods said.
If Exxon wins and the Chevron-Hess deal ends, Hess would remain a standalone company and retain its stake in the Stabroek block.
The Chevron-Hess deal is also facing scrutiny from the Federal Trade Commission. Turenne said Chevron expects the FTC review to conclude in the coming weeks.
Institutional Shareholder Services had called on Hess shareholders to abstain from voting on the merger agreement to allow for further details on how long the arbitration process would take.
ISS said Chevron and Hess failed to promptly inform shareholders of the risk posed by the joint operating agreement, waiting until months after the deal was announced. Hess shareholders would bear the risk if the deal were canceled because Chevron is not obligated to pay a termination fee, according to ISS.
Shareholders would also not be entitled to Chevron’s dividend during the arbitration proceedings, according to ISS. The dividend was presented by Hess as one of the main advantages of the merger, according to ISS.
Glass Lewis, on the other hand, recommended that shareholders vote in favor of the deal. The company acknowledged that the dispute with Exxon had created uncertainty, but said “the strategic and financial benefits of the proposed merger are strong and reasonable, overall.”
cnbc
