Hess investor D.E. Shaw to abstain from voting on $53 billion Chevron acquisition amid ExxonMobil arbitration
(Bloomberg) – D.E. Shaw & Co., one of the top 15 shareholders in Hess Corp., plans to abstain from voting on the oil company’s $53 billion acquisition by Chevron Corp., becoming the second major investor this week to come out against the deal.
The New York-based investment firm will support a motion to delay the vote until there’s more clarity around Chevron and Hess’s arbitration case with Exxon Mobil Corp., managing director Jason Singer said in an interview. Exxon believes it has a right-of-first refusal over Hess’s most valuable asset — a 30% stake in the Stabroek block offshore Guyana, which is operated and 45% owned by the Texas oil giant.
Hess’s shareholder vote is now mired in considerable uncertainty, representing yet another potential roadblock to what would be Chevron’s biggest deal in two decades. Investors are being asked to effectively lock in the sale even though the arbitration case with Exxon at the International Chamber of Commerce could take until the end of the year or even longer.
D.E. Shaw is the 14th-largest shareholder in Hess after making the second-biggest purchase of its stock of any investor in the first quarter, according to data compiled by Bloomberg. Hess said in a statement that it has “strong shareholder support” for the deal and is “confident the transaction will be successfully completed.”
Earlier this week, Institutional Shareholder Services Inc. said investors shouldn’t support the deal and should instead vote for a delay on May 28. HBK Capital Management, Hess’s fifth-largest investor, and now D.E. Shaw agree with that advice.
“We intend to follow the ISS recommendation to abstain from voting on the Hess acquisition by Chevron, and to support the motion to adjourn the vote,” D.E. Shaw’s Singer said. “The transaction, as currently structured, doesn’t contemplate the time it takes to arbitrate with Exxon. As long-term holders, we believe Hess is a high-quality company with attractive assets and a bright future.”
Chevron shares rose 0.7% at 12:55 p.m. in New York while Hess was up 0.4%.
Chevron “may want to consider an incentive” to compensate Hess shareholders for the delay, which means they won’t be paid the oil giant’s dividend for some time, ISS said.
“If Chevron is indeed confident that the arbitration will play out as it expects, this would be a way of signaling its conviction,” ISS said in its May 13 report.
Glass Lewis, another influential proxy advisor, recommended shareholders vote in favor of the deal on Thursday. While some aspects of the merger are less than ideal, its overall merits are “sound and reasonable,” the firm said.
For the deal to close, Hess needs holders of a majority of its outstanding shares of common stock to vote in favor of it.
