Hess Corp's $53B Chevron Merger Faces Critical Vote

Hess Corp (HES:US) CEO John Hess faces a crucial Tuesday deadline to address shareholder concerns over a proposed $53 billion sale to Chevron Corp (CVX:US). The deal initially poised for approval has seen wavering support due to a prolonged U.S. regulatory review and an arbitration challenge from Exxon Mobil (XOM:US).

Hess has actively engaged with investors, but interviews suggest around 40% of shares are still being determined. Hess's family and executives control 10%, but he needs over 50% of the 308 million outstanding shares. The company’s market value has dropped $5 billion since the deal's announcement.

Key hedge funds, including HBK Capital Management, D.E. Shaw & Co., and Pentwater Capital Management, holding nearly 6% of Hess, have not endorsed the merger. Additionally, three investors filed lawsuits to delay the vote, citing nondisclosure of potential legal and regulatory issues.

Influential proxy advisors (ISS) recommended abstention for more clarity on the arbitration, while Glass Lewis supports the deal for its premium to shareholders. Vanguard Group, holding 10% of Hess's shares has yet to disclose its vote, which could be decisive.

Exxon’s arbitration claims a right of first refusal on Hess' Guyana assets, which Chevron and Hess dispute. If successful, Chevron could exit without a breakup fee.

Chevron views the acquisition as vital to stay competitive with Exxon and manage geopolitical risks. CEO Michael Wirth expressed confidence in the deal's completion. At the same time, some Hess shareholders speculate Exxon might offer a higher bid for the Guyana assets if the arbitration resolves in its favor.

On the political front, Senator John Boozman was seen recently reducing his holdings in HES on March 28, while Senator Tommy Tuberville and Representative Chip Roy both reported selling their stakes in CVX in April.