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Update 2:50pm: Adds Chevron comment, reporting on a shareholder who plans to abstain from vote.
Hess Corp. (NYSE:HES) shareholders should abstain from voting for its planned $53 billion to sale to Chevron (NYSE:CVX), influential proxy adviser ISS said. Chevron fell 0.9%.
Hess (HES) holders should abstain 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, ISS recommended on Monday.
"During the adjournment, CVX may want to consider an incentive, perhaps in the form of a ticking fee, to compensate HES shareholders for a potential delay in the deal closing (or a deal break); If CVX is indeed confident that the arbitration will play out as it expects, this would be a way of signaling its conviction," ISS wrote in a recommendation viewed by Seeking Alpha.
The Hess acquisition has become controversial in recent months after Exxon (XOM) started the arbitration case with Chevron (CVX).
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 have told Seeking Alpha.
“We look forward to Hess obtaining a successful shareholder vote and completing the transaction," a Chevron spokesman said in an email to Seeking Alpha.
Hess (HES) holders are scheduled to vote on the Chevron (CVX) deal on May 28.
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, Panagiotopoulos said.
It's not clear if the HBK Capital holdings of Hess (HES) are for the record date required to vote at the meeting.
The current terms "of the merger agreement and recent developments provide the buyer (CVX) and the potential interloper (XOM) with substantial optionality, while HES shareholders bear the risk of a potentially broken deal without any compensation," ISS wrote in its recommendation.
Earlier on Monday, CNBC's David Faber reported that Hess Corp. shareholders appear to not be writing any letters about Chevron's (CVX) upcoming shareholder vote.
"Those letters, if they were written, I think they have been written and not sent," Faber said earlier on the business network. "It doesn't appear that they are going to be."
News of the ISS recommendation was earlier reported by Bloomberg.
Exxon (XOM) CEO Darren Woods said last Monday that the arbitration with Chevron (CVX) may be pushed into next year.