Hess Shareholders Approve $53 Billion Chevron Acquisition as Exxon Mobil Dispute Looms

Hess Shareholders Approve $53 Billion Chevron Acquisition as Exxon Mobil Dispute Looms

Hess shareholders have given their nod to the acquisition of the company by Chevron for $53 billion. However, the finalization of this deal is contingent upon the resolution of a dispute with Exxon Mobil. The conflict arises from Exxon's claim of a right of first refusal over Hess' assets in Guyana, leading to arbitration proceedings. This tussle has caused a delay in the timeline originally set for the deal's closure in the first half of 2024. If Exxon emerges victorious, Hess would continue to operate as a stand-alone entity and maintain its stake in the Stabroek Block.

The acquisition is also encountering resistance from the Federal Trade Commission, even as shareholders were urged to give their approval in light of the uncertainties and potential risks involved.

Key Takeaways

• Hess shareholders have greenlit the $53 billion acquisition by Chevron, but the completion of the deal hinges on resolving arbitration proceedings with Exxon Mobil.
• Exxon Mobil's right of first refusal over Hess' assets in Guyana has caused a potential snag in the deal, leading to arbitration delays, with a ruling expected in Q4 2024.
• If Exxon prevails, Hess will remain independent and retain its stake in the Stabroek Block.
• The Chevron-Hess deal is under review by the Federal Trade Commission, with Chevron anticipating a conclusion in the near future.

Analysis

The approved Chevron-Hess acquisition is facing potential hurdles due to Exxon Mobil's right of first refusal over Hess' Guyana assets, resulting in arbitration delays. Should Exxon prevail, it will empower Hess to retain its independence and hold onto its Guyana stake. The scrutiny from the Federal Trade Commission adds to the existing uncertainties. This delay in acquisition could impact Chevron's growth strategy and Hess's market standing, while a successful outcome for Exxon could fortify its Guyana foothold. The ruling, slated for Q4 2024, carries significant long-term implications depending on the verdict and regulatory review results.

Did You Know?

• Right of First Refusal (ROFR): It grants one party the rights to engage in a business transaction before the transaction is offered to others. In this context, Exxon Mobil wields a ROFR over Hess' Guyana assets, enabling it to stake a claim before the assets are offered to Chevron.
• Arbitration Proceedings: These are legal processes through which disputes are resolved by an impartial third party, known as an arbitrator. It is a less formal and time-saving alternative to litigation in court. In this instance, arbitration proceedings are being utilized to settle the disagreement between Exxon and Hess concerning the Guyana assets, thus delaying the completion of the Chevron-Hess deal.
• Federal Trade Commission (FTC) Review: It involves the evaluation of proposed mergers or acquisitions to ensure there are no anticompetitive ramifications. The Chevron-Hess deal is undergoing scrutiny by the FTC, with Chevron expecting a resolution in the near future. This review is crucial to safeguard consumers and competition within the industry.