Hess Corp (NYSE:HES) shareholders are set to vote on Tuesday regarding Chevron’s (NYSE:CVX) proposed $53 billion acquisition of the company. Many investors are pushing for a delay, hoping for a better offer.
The vote is crucial for both companies. Regulatory review and an arbitration dispute with Exxon Mobil (NYSE:XOM) have already delayed the deal and could push its closing to 2025 or result in its termination. The deal spread, a Wall Street indicator of merger confidence, has doubled to about $10, signaling increased risk perception.
Chevron is relying on the deal’s approval to gain access to oil-rich offshore fields in Guyana. If the deal fails, Hess would remain an independent entity with little immediate prospect of a new bid.
Hess needs a majority of its 308 million outstanding shares to approve the all-stock deal and make it harder for other potential bidders to outbid Chevron.
Exxon has shown no interest in bidding for Hess as a whole but has not ruled out a potential bid for Hess’ assets in Guyana, the company’s most valuable asset. Exxon operates all production in Guyana’s rapidly growing oil sector with a 45% stake in the Stabroek Block, while CNOOC owns 25%. Both companies claim a right of first refusal on any sale of Hess’ 30% stake.
The Chevron acquisition was put in jeopardy after Exxon and CNOOC filed an arbitration claim against the sale.
Investment firms Vanguard Group and BlackRock, which hold a combined 15% of Hess’ shares, could influence the vote significantly, especially with arbitrage funds pushing to postpone the meeting until the arbitration claim is resolved.
Proxy firm Institutional Shareholder Services recommended that shareholders abstain from voting and urged Hess to provide an incentive due to the deal’s delay.
As of last week, shareholders owning about 40% of the combined shares were considering abstaining from the vote, which effectively counts as a vote against the deal. They believe finalizing the deal now would prevent the possibility of better offers throughout the year.
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