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.
The CEOs of the acquired companies, some of whom were founders and attached to them, were reluctant to agree to cash deals that would crystallize a price they may end up regretting should energy prices move up, these people said. "It's a win-win. Since our shareholders are getting Chevron stock, we get to participate in the upside, and also get a higher dividend," he said.
The Hess deal represents a small 4.9% premium to Friday's closing share price. This is because the company's valuation was already frothy; Hess shares have returned 330% to their shareholders, including dividends, over their last three years, and Morningstar analysts said on Monday they were trading 40% over what they believe was their fair value.
Chevron said on Monday it would raise its dividend by 8% in the first quarter after it grew annually by 6%, and would also buy back stock worth $20 billion annually - enough to repurchase all the stock issued to buy Hess in just three years.