Mr. Market Not Happy With Chevron/Hess Deal

Summary:

  • Chevron’s acquisition of Hess Corporation in a $53 billion all-stock deal was met with negative market reaction, with shares of both companies dropping.
  • The deal has been pitched by Chevron as a major move aimed at significantly boosting cash flows and keeping production growing into the 2030s.
  • Irrespective of the $1 billion in proposed synergies, the transaction is not as clear-cut as management makes it out to be since a lot of forecasts are questionable.
  • Energy price volatility also creates uncertainties regarding just how positive this move will be.
  • In all, this is a controversial deal that dents my previous bullish view of Chevron.
Chevron headquarters

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Normally when one company announces that it will acquire or absorb another, shares of one of the firms increases while shares of the other drops. This is because the market typically judges that the acquire is paying a premium for the company


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