Chevron Finally Completes The Hess Acquisition – The Special Situations Report Episode #28

Episode Summary

Executive Summary: Episode 28 reviewed a busy week in special situations: takeover approaches, two long-delayed megadeals finally closing, several new mergers and spins, large buybacks, insider activity, activist pressure, and C-suite shakeups. The hosts emphasized how event-driven catalysts—from arbitration outcomes to CVRs and reverse Morris trusts—can materially alter deal outcomes and investment theses.

Main Topics: Major M&A Closings and Deal Controversies (Priority: 5/5): Chevron’s Hess acquisition finally closed after a 21-month battle involving antitrust scrutiny, Exxon’s contractual challenge, shareholder process issues, and geopolitical tension in Guyana/Venezuela. Other large deals also closed, including US Steel/Nippon Steel, Juniper/HPE, and ANSYS/Synopsys. Newly Announced and Repriced Transactions (Priority: 5/5): Several fresh deals were highlighted, including Geely’s acquisition of Zeekr at a negative spread, Zimmer Biomet’s purchase of Monogram with a large CVR component, and Huntington’s all-stock acquisition of Veritex Holdings. Spin-offs and Reverse Morris Trusts (Priority: 4/5): Becton Dickinson detailed a reverse Morris trust combining its biosciences and diagnostics unit with Waters, designed to be tax-efficient and deleveraging for BD. GCI Liberty also completed its spin-off and began trading. Buybacks and Capital Allocation (Priority: 4/5): Gentex, Citigroup, and Jabil each announced sizeable repurchases, with the hosts stressing that some firms are meaningfully retiring shares rather than merely offsetting dilution. Insider Trading and Flip-Flopper Signals (Priority: 4/5): Dyne Therapeutics CEO John Cox made a notable buy after a prior sale, triggering a short-swing profit repayment and prompting discussion of how insider activity can signal changing conviction. Activism and Strategic Alternatives (Priority: 4/5): Elliott became active in HPE and Global Payments, while Kenvue ousted its CEO and launched a strategic review amid pressure from activist investor TOMS Capital. C-Suite Transitions in Consumer and Retail (Priority: 3/5): Leadership changes at Kenvue, Dollar General, and Dave & Buster’s were presented as responses to performance pressure, strategic pivots, and operational resets.

Key Arguments: Chevron’s Hess deal showed that even heavily contested, highly complex mergers can ultimately close after arbitration and board/shareholder hurdles are resolved. Geely’s Zeekr offer is especially notable because the stock trades above the announced cash price, suggesting shareholders expect either a higher bid or are pricing in deal risk. Monogram’s CVR makes the deal unusual because the contingent value component is far larger than the upfront cash, creating optional upside that can drive trading above the headline offer price. BD’s reverse Morris trust is a tax-efficient way to separate low-growth assets while improving leverage, and Waters gains scale despite taking on more debt. Buybacks remain an important event-driven catalyst when companies have strong balance sheets and are genuinely retiring shares rather than simply offsetting dilution. Dyne Therapeutics’ insider purchase is significant not only because of the flip-flop but also because the company’s DMD program could benefit from Sarepta’s setbacks. Elliott’s involvement in HPE and Global Payments suggests renewed activist focus on strategic restructuring, board influence, and potential simplification of business portfolios. Kenvue’s strategic review may be more likely to end in asset sales or breakup than a single buyer acquisition because of its large enterprise value and regulatory risk.

Data Points: Episode number: 28 - Special Situations Report episode identifier Chevron/Hess deal value: $53 billion - Acquisition of Hess by Chevron announced in October 2023 Time to close Hess deal: Nearly 21 months - Length of the Chevron-Hess transaction process Guyana oil block size: 6.6 million acres - Offshore block central to the Hess/Exxon/Chevron dispute Estimated oil reserves: 11.6 billion barrels - Estimated reserves in the Guyana block Hess stake in block: 30% - Hess ownership in the Guyana oil project Exxon stake in block: 45% - Exxon’s ownership in the Guyana oil project CNOOC stake in block: 25% - China CNOOC’s ownership in the Guyana oil project Zeekr acquisition value: $8 billion - Geely’s announced acquisition of Zeekr Zeekr offer price: $2.69 per common share / $26.87 per ADS - All-cash consideration announced by Geely Zeekr negative spread: 11% - Stock trading above/relative to the offer despite announcement Monogram cash consideration: $4.04 per share - Zimmer Biomet’s upfront cash offer Monogram CVR upside: Up to $12.37 per share - Contingent value right tied to milestones through 2030 Monogram trading price: $5.67 - Stock trading above cash offer due to CVR value Veritex acquisition value: $1.9 billion - Huntington Bankshares acquisition of Veritex Holdings Veritex exchange ratio: 1.95 shares - Huntington shares issued for each Veritex share BD transaction value: Approximately $70 billion - BD biosciences/diagnostics business combination with Waters Waters ownership post-deal: 61% - Waters’ stake in the combined entity after the reverse Morris trust BD pre-closing cash distribution: $4 billion - Cash paid to BD before closing while Waters raises debt Waters new debt: $4 billion - Debt financing tied to the transaction Waters leverage: 2.3x EBITDA - Implied leverage after new debt is added BD net debt: Over $18 billion - BD balance sheet leverage prior to transaction BD net debt vs FCF: About 6x free cash flow - Used to justify deleveraging rationale Gentex buyback size: Nearly $1 billion - Share repurchase announcement by Gentex Gentex buyback as % of market cap: About 18% - Size relative to company value at announcement Citigroup buyback: Additional $4 billion in Q3 - Incremental repurchases announced with Q2 earnings Citigroup total authorized buyback: $20 billion - Earlier 2025 repurchase authorization mentioned Citigroup year-to-date repurchases: $3.75 billion - Amount already bought back under the program Jabil buyback size: $1 billion - Repurchase announced by Jabil Jabil buyback as % of market cap: 4% - Size relative to company value at announcement Jabil shares repurchased over 4 years: 26% of shares outstanding - Evidence of aggressive execution of buybacks Dyne insider purchase: Nearly $1 million - CEO John Cox bought shares after prior sale Dyne short-swing repayment: Approximately $29,000 - Amount repaid to issuer due to short-swing profit rule Dyne secondary offering price: $8.25 per share - Recent offering price prior to insider purchase Dyne insider buy price: $9.11 per share - CEO’s open-market purchase price Dyne stock decline: Down 80% in the last year - Reflects biotech sector weakness and company-specific pressure Sarepta stock decline: Down 90% in the last year - Context for DMD competitive opportunity and sector stress Sarepta single-day drop: 36% - Market reaction after another death linked to a DMD therapy Global Payments acquisition value: $24.2 billion - Worldpay acquisition that drew investor backlash Kenvue enterprise value: Nearly $50 billion - Context for strategic alternatives and takeover feasibility Dollar General CFO tenure: 2 years and 10 months - Length of prior CFO’s service before departure Dollar General stock performance during tenure: Down 46% - Performance backdrop to the CFO exit Dave & Buster’s CEO hire: Tarun Lal - New CEO previously with KFC/Yum Brands

Pivotal Quotes: "had more twists and turns than a Christopher Nolan movie" — Asif Suria: Describing the complexity and drama of the week’s large M&A situations "This deal had it all. Anything that you could think of went wrong with this deal, but it did successfully close." — Asif Suria: Summary of the Chevron-Hess transaction’s prolonged and contested path to completion "the thing that jumped out to me the most was: Waters looked like an interesting company that I would want to explore further" — Tamana Suria: Reaction to the BD/Waters reverse Morris trust and Waters’ longer-term investment appeal

Implications: Event-driven investors should watch for deal-specific catalysts, especially arbitration, CVRs, and activist pressure. The episode suggests that negative spreads, major buybacks, and insider flip-flops can all signal mispriced opportunity or rising complexity.