A major arbitration case is underway as ExxonMobil (XOM, Financial) challenges Chevron's (CVX) $53 billion acquisition of Hess Corporation (HES). At the heart of the dispute is ExxonMobil's claim to a preemptive right to purchase Hess's 30% stake in a lucrative oil field off the coast of Guyana. This issue has been a significant hurdle since the deal's announcement in 2023. The International Chamber of Commerce has begun closed-door hearings in London to assess ExxonMobil's claims, with a decision expected within 90 days.
Certain hedge funds are heavily invested in this outcome, having acquired approximately $10 billion worth of Hess stock, representing 22% of its publicly traded shares. Notable holders include Citadel Advisors LLC and DE Shaw & Co. These funds are betting on the merger's completion, with a potential annualized return of nearly 20% if finalized soon. However, the significant price gap between Hess's current stock price and Chevron's offer indicates inherent risks.
The outcome is crucial for Chevron, which views the Guyana assets as vital to its portfolio. If the arbitration favors ExxonMobil, Chevron may abandon the deal, impacting its strategic opportunities.
