The anticipated acquisition between Chevron and Hess, inked last year at a staggering $53 billion, was poised to usher in a new era for the oil behemoth, promising a strategic foothold in burgeoning global markets. Yet, the current trajectory of the deal appears more ambiguous than ever, with Hess shareholders split on the pivotal decision of whether to greenlight it. The pivotal moment arrives with a critical Hess shareholder vote slated for Tuesday, casting a spotlight on the fate of this high-stakes merger.
Amidst the unfolding drama, market indicators hint at a cloud of uncertainty hovering over the deal’s success. Roy Behren, co-chief investment officer of Westchester Capital Management, sheds light on this sentiment, describing the stock’s trading pattern akin to a coin toss. His firm, well-versed in merger-arbitrage strategies, discerns potential value in the deal despite prevailing skepticism.
The diverging trajectories of Hess and Chevron’s stock prices underscore the prevailing skepticism, suggesting a probability range of approximately 40%-45% for the merger to materialize. While Chevron’s leadership exudes confidence in the deal’s approval, entrenched Hess shareholders harbor reservations, especially after a recommendation by Institutional Shareholder Services to postpone the vote surfaced.
The landscape is further complicated by major funds signaling their intent to abstain from the merger vote, a move that tilts the scales against Hess in securing the requisite majority approval from outstanding shares. Of particular concern is Hess’ ownership stake in a lucrative offshore project in Guyana, which Exxon has contested, invoking a right of first refusal and thereby escalating the uncertainty surrounding the merger.
In response to these developments, ISS has urged shareholders to abstain from the merger decision and temporarily adjourn proceedings, calling on Chevron to sweeten the deal for Hess shareholders. Despite these headwinds, Chevron and Hess stand firm in their conviction that the merger will proceed under the current terms.
The outcome of Tuesday’s vote hinges on major shareholders such as Vanguard, State Street, and BlackRock, whose collective influence could sway the tide in favor of or against the merger. Yet, even if the vote garners approval, uncertainties persist, including ongoing challenges such as the Exxon arbitration and FTC review.
Nonetheless, a favorable vote would assuage significant concerns and potentially reinvigorate shareholder confidence in both entities, underscoring the significance of this crucial juncture in the Chevron-Hess saga.