Hess shareholders should vote in favor of Chevron deal, Glass Lewis says

Hess Corp. (NYSE:HES) shareholders vote for its planned $53 billion to sale to Chevron (NYSE:NYSE:CVX), proxy adviser Glass Lewis said.

Glass Lewis advised that Hess holders should vote in favor of sale to Chevron (CVX) at Hess’s vote on May 28, according to recommendation from the proxy firm viewed by Seeking Alpha on Thursday.

The Glass Lewis report comes after proxy service ISS on Monday recommended that Hess (HES) holders abstain from voting while waiting for more details to emerge on the arbitration process with Exxon Mobil (NYSE:XOM) over a massive oil block off the coast of Guyana.

“We acknowledge there are certain elements of the proposed merger that are perhaps less than ideal, including the lack of a pre-signing market check by the company, as well as the deal uncertainty owed to the Stabroek ROFR arbitration and the ongoing antitrust review,” Glass Lewis wrote in its report. “Having said that, we believe the strategic and financial merits of the proposed merger are sound and reasonable, on balance. By combining with Chevron, Hess expects shareholders to benefit from having greater asset and geographic diversification, exposure to a stronger balance sheet, and the ability to realize various operational and cost synergies.”

While Glass Lewis is recommending a vote in favor of the deal, some shareholders are expected to vote to abstain from the vote. At least five of the top 20 Hess (HES) shareholders are expected to abstain, a person familiar told Seeking Alpha on Thursday.

HBK Capital Management, one of the biggest shareholders in Hess (HES), expects to abstain from voting on the deal, according to a Bloomberg report on Monday, which cited an interview with one of the firm’s partners, Nikos Panagiotopoulos. HBK has economic interests in more than 8 million shares of Hess.

Some Hess (HES) shareholders believe they are getting shortchanged in the all-stock deal with Chevron (CVX), especially in light of the highly coveted Guyana oil assets. There are some Hess shareholders who believe the stock would be higher if it were not being purchased by Chevron, traders told Seeking Alpha earlier this month.

“Hess shareholders will have the opportunity to participate in the potential future upside of the combined company through their receipt of newly-issued Chevron shares as the sole form of merger consideration in the deal, ” Glass Lewis wrote in the report. “Further, based on the findings from Goldman Sachs’ fairness opinion and our own review, we believe the merger consideration provides shareholders with a relatively reasonable valuation and market premium for their Hess shares. Based on these factors, we believe the Merger Agreement warrants shareholder support at this time.”