Chevron’s Hess Deal Suffers New Blow as Arbitration Drags On

(Bloomberg) — Chevron Corp.’s $53 billion proposed takeover of Hess Corp. suffered another setback as an arbitration hearing to settle an ownership dispute with Exxon Mobil Corp. won’t be held until next year.

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The international arbitration panel handling Exxon’s claim that Chevron’s acquisition does not give it the right to control Hess’ stake in a Guyanese oil project has scheduled the hearing for May, the companies said Wednesday.

“Hess and Chevron had expected and requested that this hearing be held earlier,” the companies said in a joint statement. “But the arbitrators’ common schedules did not make this possible.”

The delay is a significant blow to the embattled deal, which remains far from completion more than nine months after it was announced. It is still under review by the US Federal Trade Commission, which plans to delay its decision whether to try to block the merger until after the arbitration case is settled.

Hess shares fell as much as 3.5% after the close of regular trading in New York. Chevron dipped as much as 1.7%.

Chevron announced its agreement to buy Hess in October, marking what would be the company’s biggest takeover in two decades. The centerpiece was Hess’s 30% stake in a giant Guyanese oil field controlled by Exxon, the largest oil discovery of the past decade.

Exxon operates the block and owns a 45% stake. Hess and China’s Cnooc Ltd. own the remaining 30% and 25%, respectively. Chevron has said it would scrap the entire deal to buy Hess if the company’s stake was not included in the transaction.

Exxon dealt the merger a body blow in March when it filed for arbitration, claiming it has a right of first refusal over Hess’ stake.

Hess investors approved the Chevron takeover in May by just 51% after several large shareholders and Institutional Shareholder Services Inc. argued the vote should be delayed until after the arbitration case. The investors expressed concern that they would not receive Chevron dividends until the deal is complete, eroding the value of the transaction.

Chevron has said it is confident it will prevail in arbitration.

“The views of Chevron and Hess on the merits remain unchanged,” the companies said Wednesday. “Exxon and Cnooc continue to ignore the plain language of the operating agreement, and Chevron and Hess remain confident.”

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