TAYO ELEGBEDE
An investor, Elliott Management Corp. is planning to push for Noble Energy Inc. to abandon its planned sale to Chevron Corp.
The investor argued that the deal undervalues the oil and gas producer, according to people familiar with the matter.
A Bloomberg report said Elliott believes the company is better positioned to benefit from a recovery in oil prices on a standalone basis, and should consider selling its Mediterranean assets when that happens.
The New York-based hedge fund, which is run by billionaire Paul Singer, also believes the takeover was done at the wrong time for the wrong reasons.
Bloomberg, however, said it hasn’t ascertained the size of Elliott’s stake in Noble Energy, adding that “the firm was granted early termination under the Federal Trade Commission’s Hart-Scott-Rodino Act — a requirement when an investor buys shares above a certain threshold and seeks talks about topics such as strategy or management changes.”
It will be recalled that in July,
Chevron Corporation disclosed a definitive agreement with Noble Energy, Inc. to acquire all of the outstanding shares of Noble Energy in an all-stock transaction valued at $5 billion, or $10.38 per share.
The purchase, according to Chevron, was dependent on its closing price on July 17, 2020 and under the terms of the agreement, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share, and the total enterprise value, including debt, of the transaction was $13 billion.
“Elliott built its position after the $5 billion deal was announced in July, and owned all of its shares prior to the record date to vote on the deal,” the report said.
“We believe our offer represents a fair value for the business and that the transaction will create long-term value for shareholders of both companies,” said Braden Reddall, a Chevron spokesman, in a statement, adding that the company continues to believe the transaction will close in the fourth quarter.
A representative for Elliott declined to comment while a representative for Noble wasn’t immediately available for comment.
Noble shares rose two per cent at 10:30 a.m. in New York.
Chevron shares climbed 2.2 per cent”.
Bloomberg said “Chevron agreed to buy Noble in an all-share deal as the oil giant looks to beef up its presence in the Permian Basin.
“The deal would also increase Chevron’s exposure to the Denver-Julesburg Basin in Colorado, and enlarge its footprint in the Eastern Mediterranean by adding the Leviathan gas field off the coast of Israel.”
Meanwhile, the report noted the deal was struck at roughly a 7.5 per cent premium to where Noble’s shares were trading, it was made after the stock lost about 60 per cent of their value since the start of the year amid a rout in oil prices and the outbreak of the coronavirus.
Noble’s Chief Executive Officer, Dave Stover, said at the time that the deal would allow his company’s investors to maintain upside exposure in the combined company and enjoy much greater scale.
Elliott believes members of Noble’s management stand to make about $88 million in various forms of compensation from the deal, including $60 million for senior managers, the people said.
The investor also believes that Noble investors received a poor ratio of Chevron shares and so won’t benefit from a recovery in oil prices as they would if the company was a standalone entity.
Noble’s shareholders are scheduled to vote on the deal on October 2.
The agreement carries a $176 million termination fee that is payable by either party under certain circumstances if the transaction isn’t consummated, according to a regulatory filing. That fee isn’t payable if Noble’s investors vote down the deal.
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