Glass Lewis Nods to Hess-Chevron $53B Deal Amid Exxon Hurdle

Key Takeaway

• Glass Lewis recommends Hess shareholders approve Chevron's $53 billion acquisition, highlighting future benefits despite ISS's valuation concerns.
• The deal's success is clouded by Exxon's arbitration over a Guyanese oil project stake, affecting the merger terms and timeline.
• Chevron plans to sell its North Sea assets for $15 billion to fund high-return projects, aligning with its strategic growth focus.

Proxy Advisory Firms Split on Chevron-Hess Deal

Chevron Corp.'s proposed $53 billion acquisition of Hess Corp. has garnered mixed reactions from proxy advisory firms, highlighting the complexity and potential risks associated with the deal. Glass Lewis & Co. has recommended that Hess shareholders vote in favor of the merger, citing the opportunity for shareholders to benefit from the future upside of the combined entity through newly issued Chevron shares. They described the merger's merits as "sound and reasonable," despite acknowledging some less than ideal aspects of the deal.

In contrast, Institutional Shareholder Services Inc. (ISS) advised Hess shareholders to withhold their votes, raising concerns about the transaction's valuation and the uncertainty surrounding the arbitration case between Exxon Mobil Corp. and Chevron over a stake in a Guyanese oil project. This divergence in recommendations from leading proxy advisory firms has introduced uncertainty into what would be Chevron's largest deal in decades.

Strategic Implications and Arbitration Uncertainty

The acquisition is strategically important for Chevron, aiming to secure Hess's 30% stake in a significant oil field off Guyana, considered the world's largest and most profitable crude discovery in the past decade. However, the deal is complicated by Exxon's arbitration claim, filed in March, asserting a right of first refusal over Hess's stake in the Guyana project. This legal challenge has cast a shadow over the merger, with the outcome of the arbitration likely to influence the deal's final terms and timeline.

Divestment and Acquisition Strategy

As part of its broader strategy and in preparation for the acquisition, Chevron has announced the sale of its 19.4% stake in the UK's Clair oilfield, marking its exit from the North Sea after 55 years. This divestment is part of a $15 billion asset sale strategy aimed at reallocating resources towards more competitive and strategic assets. The proceeds from the North Sea asset sale are expected to fund high-return projects, aligning with Chevron's focus on optimizing its portfolio for future growth and sustainability.