Macro

Schumer Warns FTC on $60B Chevron-Hess Deal Impacting Gas Prices

Schumer opposes $53B Chevron-Hess merger, urging FTC to protect consumers from potential gas price hikes.

By Athena Xu

5/13, 03:08 EDT
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Chevron Corporation
Hess Corporation
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Key Takeaway

  • Senate Majority Leader Schumer urges FTC to scrutinize Chevron's $53B acquisition of Hess, citing potential for higher gas prices.
  • The merger, valued at $60 billion including debt, could consolidate Big Oil's power, impacting consumer costs.
  • FTC's extended review under the HSR act signals regulatory caution amid concerns over market competition and pricing.

Schumer Raises Concerns Over Chevron-Hess Merger

Senate Majority Leader Chuck Schumer has publicly expressed his apprehensions regarding the proposed $53 billion merger between Chevron Corp and Hess Corp. Schumer's main concern is that this merger could potentially enable oil majors to further increase gas prices, impacting consumers negatively. He articulated his stance via social media, stating, “I'm sounding the alarm against yet another proposed Big Oil merger—a $53B deal between Chevron and Hess. It would give Big Oil more fuel to raise gas prices.” Schumer's call to action was directed towards the Federal Trade Commission (FTC), urging them to reconsider the approval of this significant merger.

The Merger's Financial Implications

In October, Chevron announced its intention to acquire Hess in an all-stock transaction valued at $53 billion, or $171 per share, which includes a premium of 10.3% based on the 20-day average of closing prices as of October 20, 2023. The total enterprise value of the deal, factoring in debt, reaches approximately $60 billion. This merger is not just a significant financial move but also a strategic play within the energy sector, potentially reshaping the market dynamics and influencing fuel pricing structures.

FTC's Role and Schumer's Advocacy

Schumer has been a vocal critic of large oil mergers, advocating for increased scrutiny to prevent potential negative impacts on consumer prices. His concerns are backed by a collective stance from 22 other Democratic senators who, in November, echoed similar sentiments in a letter to the FTC. The regulatory body has since issued a second request for additional information from Chevron and Hess, extending the waiting period for the merger under the Hart-Scott-Rodino (HSR) Act. This move indicates a deeper review process, possibly taking Schumer's concerns into account.

Market Reaction and Future Outlook

Following the announcement, Chevron and Hess's stock prices have been under the investor's radar, with Chevron closing at $165.80 and Hess at $160.35 as of the last trading session. Both companies have recently reported earnings surprises for the first quarter of 2024, surpassing analysts' expectations. This financial performance highlights the companies' robust positions in the market, making the merger's outcome a significant event for stakeholders.