Chevron Corp’s $53 billion deal to acquire Hess Corp. has garnered a mixed reception from major proxy advisory firms. Glass Lewis & Co. issued a report on Thursday recommending that Hess shareholders vote in favour of the merger. Despite acknowledging that some aspects of the deal are less than ideal, Glass Lewis highlighted that Hess shareholders could benefit from the potential future upside of the combined company through newly issued Chevron shares, deeming the merits “sound and reasonable.”
In contrast, Institutional Shareholder Services Inc. released a report on Monday advising Hess shareholders to withhold their votes. ISS raised concerns about the transaction’s valuation and uncertainties surrounding the timeline of an ongoing arbitration case between Exxon Mobil Corp. and Chevron regarding a stake in a Guyanese oil project.
These conflicting recommendations have created uncertainty about the outcome of Chevron’s largest deal in decades. The transaction still requires approval from the US Federal Trade Commission and must navigate the arbitration with Exxon, which is expected to extend through at least the end of the year.
On Friday, Chevron shares rose 0.4 percent, while Hess shares climbed 0.5 percent. However, HBK Capital Management, Hess’s fifth-largest investor, has aligned with ISS’s position and plans to abstain from voting on May 28.
The strategic impetus behind Chevron’s pursuit of Hess lies in acquiring a 30 percent stake in a massive oil field offshore Guyana, which is the world’s largest and most profitable crude discovery of the past decade. Exxon, which owns 45 percent of the site and operates it, filed for arbitration in March to block Chevron’s takeover, asserting a right of first refusal over Hess’s stake in the Stabroek Block offshore Guyana.
Chevron and Hess argue that this right does not apply in the context of a corporate merger. However, ISS pointed out that investors remain uncertain about the issue due to the private nature of the contract. The outcome of this arbitration and the varying recommendations from advisory firms will be crucial in determining the fate of Chevron’s ambitious acquisition.
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