Prelude to the Best Sommelier of Canada Contest | SaltWire - Exxon Mobil and Chevron are flush with cash yet their acquisition targets are taking stock as the only form of payment, an arrangement that allows the two largest U.S. energy companies to clinch transformative deals despite volatile oil and gas prices.
People involved in the negotiations of these deals, as well as analysts and executives in the sector, said that using stock as currency helped reconcile price disagreements with acquisition targets in a volatile energy market. By selling for stock, an acquired company's shareholders can participate in the upside of the combined company. They can also defer taxes by holding on to their new shares rather than cashing out.
He added that Hess shareholders who keep their shares in their combined company will see their dividend rise from $1.75 to $6 per share following the close of the deal. In similar fashion, Exxon paid just an 18% premium to Pioneer's undisturbed share price to clinch an all-stock deal for it. In the last deal that Chevron agreed to use cash - its $33 billion bid for Anadarko in 2019 - it had to stomach a much larger 39% premium.