Chevron's $53 billion Hess acquisition is not going smoothly

Chevron is a big oil company based in California that wants to acquire Hess, a big oil company based in New York, for $53 billion. Reuters reports that the matter is coming to a vote before Hess’ shareholders on Tuesday, but it’s not clear the deal is going to go through. There is more opposition than expected. That opposition is coming from Hess shareholders, prominent politicians, and a major obstacle is a dispute with ExxonMobil.

Exxon dispute

Chevron’s oil industry competitor Exxon opened a legal proceeding that could make it harder for Chevron to realize the full value of its Hess purchase. There’s a big oil field off the coast of Guyana that both Exxon and Hess have major interests in. Chevron thinks it should be able to take over Hess’ portion of the discovery. Exxon thinks it should have first dibs. Exxon has asked an arbitrator to look into it.

If Exxon gets its way, Chevron would lose access to a really valuable asset.

Antitrust concerns

A lot more mergers these days are running into concerns from government agencies and politicians. JetBlue Airways and Spirit Airlines had to call off a much smaller merger earlier this year after a lawsuit from the Justice Department led to a judge blocking the deal. A couple weeks ago, Bloomberg reports, Sen. Chuck Schumer, the New York Democrat and powerful Senate Majority Leader, called on the Federal Trade Commission to “pump the brakes” on the tie-up because it would give Chevron too much control in the energy market.

For what it’s worth, the FTC had been reviewing but this month approved a bigger acquisition, of Pioneer Natural Resources by Exxon — after forcing out Pioneer’s founder on (denied) suspicions of oil price collusion.

Shareholder reservations

Because there’s so much uncertainty around the deal, Reuters reports that several large Hess shareholders have said they’re not ready to give it the green light. Proxy advisor ISS, which helps institutional investors figure out how to vote with their stock, says they should hold off on approval while the Exxon arbitration and anti-trust situations work themselves out.