Hess shareholders approved the proposed $53 billion merger with Chevron on Tuesday, which brings the second largest US oil company closer to obtaining a prized asset due to massive discoveries in Guyana. Approval clears one hurdle, but The deal still requires regulatory approval and must face arbitration with Exxon and CnoocHess partners in Guyana.
Regulatory approval could come next monthaccording to Frederic Boucher, risk arbitrage analyst at Susquehanna Financial Group, based on the time it took for the Federal Trade Commission (FTC) to approve Exxon’s acquisition of Pioneer Natural Resources in early May.
For your approval a majority of Hess’s 308 million outstanding shares were needed to vote in favor of the agreement. The vote is a victory for CEO John Hess, who put his reputation and the future of a company founded by his father on the line.
But to approve the agreement, A resolution of the dispute submitted by Exxon and Cnooc to international arbitration is necessary. The companies stated that they have a right of first refusal on any sale of Hess’ assets in Guyana.
The Exxon arbitration could delay the closing of the deal until 2025. «We are very pleased that the majority of our shareholders recognize the value compelling of this strategic transaction and we look forward to successfully completing our merger with Chevron,” said CEO Hess.
Hess and Chevron shares gained on the results. Hess rose a fraction to $152.05 and Chevron rose less than 1% to $159.04. “Assuming Chevron wins the Exxon arbitration or reaches an agreement, the transaction will be completed now,” said financial firm MKP Advisors analyst Mark Kelly.
Hess shareholders will own nearly 15% of the much larger Chevron and have access to its dividend, which is four times larger than Hess’. Shareholder approval also strengthens companies’ position in any negotiations with Exxon.
While Exxon has shown no interest in bidding for Hess as a whole, it has not ruled out a possible bid for Hess’ assets in Guyana. «It’s good that Chevron has overcome this hurdle given the rumors about uncertainty of Guyana arbitration. However, I do not think this will influence the outcome of Exxon’s claim,” said investment firm Morningstar analyst Allen Good.
Exxon operates all production in Guyana with a 45% stake in the giant Stabroek field. CNOOC owns another 25% of the joint venture. Both claim a right of first refusal in any sale by Hess of their 30% stake.
