Chevron’s Hess Acquisition Fuels Broader M&A Frenzy

On Monday, Chevron said it would acquire energy player Hess for $53 billion. It’s the latest megadeal in a wildly active industry this month.

(Photo by Jazz Guy under CC BY 2.0)

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As the Russian revolutionary Vladimir Lenin put it: “There are decades where nothing happens; and there are weeks where decades happen.”

This is one of those weeks. On Monday, Chevron said it would acquire energy player Hess for $53 billion. It’s the latest megadeal in a wildly active industry this month, and it’s happening during one of the most pronounced deal droughts on Wall Street in recent memory.

Oil Slick

For all the talk about a looming green revolution, fossil fuel firms aren’t going anywhere, at least not soon. The International Energy Agency still projects high demand for oil and gas to increase in coming years (though it sees a peak before the decade’s end). Chevron’s takeover of Hess — completed at $171 a share, or a 10% premium over the target’s 20-day average — gives it access to oil fields in Guyana, one of the industry’s biggest global discoveries of the decade, as well as the Bakken shale formation of North Dakota. According to The Wall Street Journal, some analysts believe that Hess, Chevron, and Chinese partner Cnooc’s combined control of roughly one-third of Guyana’s oil supply could be worth $180 billion by 2027.

And this isn’t even the biggest energy deal this month. War in Ukraine stoked record profits for major industry players last year, and now that money is being used to fuel a slew of major deals. Just two weeks ago, Exxon announced a massive $60 billion purchase of shale Pioneer Natural Resources, marking the biggest oil and gas deal in decades.

The activity has revived an all-but-dormant M&A space, which has seen deal value plummet about 30% so far this year:

  • October has so far seen more than $139 billion in takeovers of publicly traded US companies, according to a Bloomberg analysis published Monday, roughly a threefold increase year-over-year, and the highest amount for any month since June 2019.
  • In addition to the two major oil deals, drugmaker Roche announced Monday a $7 billion acquisition of bowel disease treatment company Telavant, while Disney said it’s nearing a multi-billion sale of its Indian properties to Mumbai-based Reliance Industries.

The Goldman Touch: Goldman Sachs may be rapidly retreating from the consumer banking space, but it’s still the king of the hill when it comes to M&A advisory services. It held a 26% global market share so far this year, according to Bloomberg, ahead of Morgan Stanley’s 22% and JPMorgan’s 21%.

Khan You Dig It? Possibly fueling the M&A boom: the reality that FTC Chairperson Lina Khan’s antitrust blustering may be more bark than bite. Microsoft just completed its $69 billion purchase of video game giant Activision Blizzard, meaning Khan lost the battle to stop the biggest merger in tech industry history.