425: Hess Corp Addresses Lawsuits and Supplements Proxy Statement Regarding Chevron Merger

Hess Corporation is supplementing its proxy statement related to the proposed merger with Chevron to address lawsuits challenging the disclosures made in connection with the deal.

Summary

• Hess Corporation has filed a Form 8-K report addressing litigation related to its proposed merger with Chevron.
• Three lawsuits have been filed challenging the sufficiency of disclosures in the proxy statement related to the merger agreement.
• The lawsuits, filed in federal court, Delaware Court of Chancery, and the Supreme Court of the State of New York, allege misrepresentations and omissions of material information.
• Plaintiffs seek injunctions to halt the merger's consummation unless additional disclosures are made.
• Hess believes the lawsuits are without merit but is supplementing the proxy statement to avoid nuisance, expense, and delay.
• The supplemental disclosures provide additional details regarding communications between Hess and Chevron, the role of financial advisors, and financial projections.
• The company reaffirms that the original disclosures comply with applicable law and denies any legal necessity or materiality of the supplemental information.
• The document also includes forward-looking statements and disclaimers regarding the potential transaction and its associated risks.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company is facing legal challenges, it is taking proactive steps to address them. The supplemental disclosures aim to provide more transparency, but the lawsuits introduce uncertainty.

Positives

• Hess is proactively addressing legal challenges to the merger, potentially mitigating delays.
• The supplemental disclosures provide additional transparency regarding the merger process.
• The company is working to ensure the merger proceeds smoothly and efficiently.

Negatives

• The lawsuits introduce uncertainty and potential delays to the merger timeline.
• The need for supplemental disclosures suggests potential weaknesses in the initial proxy statement.
• Legal expenses associated with defending the lawsuits could impact the company's financials.

Risks

• The ongoing arbitration proceedings regarding preemptive rights in the Stabroek Block joint operating agreement could delay the merger.
• Regulatory approvals may not be obtained or may be subject to conditions not anticipated by Chevron and Hess.
• The anticipated benefits and synergies of the merger may not be realized or may not be realized within the expected time period.
• Potential litigation relating to the potential transaction could be instituted against Chevron and Hess or their respective directors.
• Changes in commodity prices could negatively affect the market price of Chevron's or Hess's common stock and/or operating results.

Future Outlook

The document contains forward-looking statements regarding the consummation of the potential transaction, including the expected time period to consummate the potential transaction, and the anticipated benefits (including synergies) of the potential transaction.

Management Comments

• All of the defendants named in the matters believe that the matters are without merit.
• However, litigation is inherently uncertain and there can be no assurance regarding the likelihood that the defense of the actions will be successful.

Industry Context

The merger between Hess and Chevron reflects a broader trend of consolidation in the oil and gas industry, driven by the desire to achieve greater scale, diversify asset portfolios, and enhance financial strength.

Comparison to Industry Standards

• The document references historical trading multiples of Hess, Chevron and certain publicly traded companies, as described below in the section captioned Selected Publicly Traded Companies Trading Multiples.
• The document references acquisition premia paid in certain all stock-only or cash-and-stock acquisition transactions listed below announced since December 31, 2019 involving U.S. publicly traded target companies in the oil and gas exploration and production industry with a transaction value of greater than $3 billion.

Legal Proceedings

• Three lawsuits have been filed challenging the sufficiency of the disclosures made in connection with the Merger Agreement.
• First, a complaint has been filed in federal court as an individual action, captioned as Globokar v. Hess Corporation, et al., 24-cv-01723 (filed March 6, 2024 in the Southern District of New York).
• Second, a putative class-action complaint has been filed in the Delaware Court of Chancery under the caption Assad v. Hess Corporation, et al., C.A. No. 2024-0468-NAC (filed May 2, 2024).
• Third, a complaint has been filed in the Supreme Court of the State of New York as an individual action, captioned as Garfield v. Checki, et al., C.A. No. 154238/2024 (filed May 7, 2024).

Stakeholder Impact

• The lawsuits and potential delays could impact shareholder value.
• The merger could affect Hess employees through integration with Chevron.
• The merger could impact customers and suppliers through changes in business relationships.

Next Steps

• Hess stockholders will vote on matters necessary to complete the Merger at a special meeting on May 28, 2024.
• Chevron and Hess will continue to seek regulatory approvals for the merger.
• The companies will defend against the lawsuits challenging the merger disclosures.

Key Dates