Hess shareholders sign off on a $53 billion sale to Chevron

The approval clears one hurdle, but the deal still requires regulatory approval and faces a protracted arbitration battle with Exxon and CNOOC Hess partners in Guyana.

Regulatory approval could come next month, says Frederic Boucher, risk arbitrage analyst at Susquehanna Financial Group, based on the time the Federal Trade Commission (FTC) took to approve Exxon’s acquisition of Pioneer Natural Resources earlier this month.

But the most crucial step to clearing the deal, he said, is a resolution of the dispute filed by Exxon and CNOOC, which claims they have the right of first refusal on any sale of Hess’ assets in Guyana.

Approval required a majority of Hess’ 308 million outstanding shares voting in favor of the deal. The results were preliminary and Hess did not immediately provide the vote count.

The vote is a victory for CEO John Hess, who risked his reputation and the future of a company founded by his father. The result puts an end to claims by some shareholders who wanted additional compensation for the delay in completing the sale. Exxon’s arbitration could see the deal close in 2025.

“We are very pleased that the majority of our shareholders recognize the compelling value of this strategic transaction and look forward to the successful completion of our merger with Chevron,” said CEO Hess.

Hess and Chevron shares rose on the results. Hess rose slightly to $152.05 and Chevron climbed less than 1% to $159.04.

“Assuming Chevron wins arbitration with Exxon or reaches a settlement, the transaction will happen now,” said Mark Kelly, analyst at financial firm MKP Advisors.

The yes vote has enormous consequences for both companies. Acquiring Hess’s profitable oil fields in Guyana would provide Chevron with a means to mitigate geopolitical risks associated with the TengizChevroil project in Kazakhstan, which transports its oil primarily through Russia to a Black Sea port.

Additionally, this acquisition could offset cost overruns at Chevron’s Australian liquefied natural gas (LNG) projects, which have been hit by labor and operational issues.

Acquiring Hess’ stake in Guyana would replenish Chevron’s oil and gas reserves and provide a new avenue for production growth, in addition to their existing operations in the U.S. and Central Asia, said Allen Good, an analyst at investment firm Morningstar.

Hess shareholders will own nearly 15% of the much larger Chevron and have access to its dividend, which is four times larger than Hess’s.

The signing by the shareholders also strengthens the position of the companies in possible negotiations with Exxon. While Exxon has not expressed interest in a bid for Hess as a whole, it has not ruled out a potential bid for Hess’ assets in Guyana.

“It is good that Chevron has cleared this hurdle given the rumblings about the uncertainty of arbitration in Guyana,” Good said. “However, I do not believe this will affect the outcome of Exxon’s claim.”

Chevron expects the FTC rulemaking process to move toward completion in the coming weeks, a spokesperson said.

“We are confident that our position on preemption will be confirmed through arbitration,” the company said.

Exxon operates all production in Guyana with a 45% stake in the giant Stabroek Block. CNOOC owns a further 25% of the joint venture. Both claim a right of first refusal on any sale by Hess of its 30% stake.

Proxy firm Institutional Shareholder Services had advised shareholders to abstain and urged Hess to provide an incentive to shareholders due to the delay in the deal.

John Hess has spent the past month lobbying major shareholders to win support for the merger. He had personally visited or called more than 30 businesses, according to people familiar with the matter.

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