Hess Corp shareholders will vote on Tuesday on Chevron’s proposed $53 billion acquisition of the company, after many investors have called for a delay in hopes of obtaining a better offer for their shares.
The vote has huge implications for both companies. The deal has been stalled in part by a regulatory review and clouded by an arbitration dispute with Exxon Mobil, which could push the deal’s closing to 2025 or result in its termination.
The deal spread, a Wall Street measure of investor confidence in the completion of a proposed merger, has climbed to about $10, double the initial spread, indicating greater risk perception over the transaction.
Chevron is counting on approval to win a foothold in oil-rich Guyana’s lucrative offshore fields. A deal failure would leave Hess as a standalone company with little immediate prospect of a new bid.
Hess needs a majority of its 308 million outstanding shares to seal the all-stock deal with its shareholders and make it more difficult for other potential rivals to outbid Chevron.
While Exxon has expressed no interest in bidding for Hess as a whole, it has not ruled out a potential bid for Hess’ assets in Guyana, the company’s prize asset.
Exxon operates all production in one of the world’s fastest-growing oil producing nations with a 45% stake in the giant Stabroek Block. CNOOC owns another 25% of the joint-venture. Both claim a right of first refusal on any Hess sale of its 30% stake.
The Chevron acquisition was thrown into doubt after Exxon and CNOOC filed an arbitration claim against the sale.
Financial firms Vanguard Group and BlackRock, which hold a combined 15% of Hess’ shares, could tip the balance in the vote, given the push by arbitrage funds to adjourn the meeting until the arbitration claim is resolved.
Proxy firm Institutional Shareholder Services recommended shareholders vote to abstain and urged Hess to offer an incentive to shareholders because of the deal delay.
As of last week, shareholders owning about 40% of the combined shares were contemplating abstaining from the vote, an action that effectively equates to voting against it, people familiar with the matter said. They say that finalizing the deal now would prevent the potential for better offers for their shares throughout the year.
(Reporting by Sabrina Valle in Houston Editing by Marguerita Choy, Gary McWilliams and Matthew Lewis)