Oil and gas company Hess Corp. (HES) said Thursday that it has reached an agreement with activist hedge fund and shareholder Elliott Management Corp. to resolve their months-long proxy battle. The agreement comes just hours before the company's annual shareholder meeting later in the day.
Under the terms of the deal, Elliott will support the election of Hess' five director nominees, while Hess will add three Elliott director nominees to the board.
Hess' five new directors are John Krenicki Jr., Fredric Reynolds, William Schrader, Kevin Meyers and Mark Williams. Meanwhile, three of Elliott's director nominees - Rodney Chase, Harvey Golub, and David McManus - will be added to the 2015 director class.
Hess noted that its reconstituted board would continue to consist of 14 persons as a result of various retirements. The board will appoint two of the Elliott nominees to a five-member nominating and corporate governance committee, while one Elliott nominee would be appointed to the compensation committee.
John Hess, Chairman and CEO of Hess, said, "We are pleased to reach an agreement that we believe is in the best interests of Hess shareholders, and we welcome each of our new directors. We remain focused on execution and believe that the new Board will provide effective oversight to ensure that we continue to create meaningful long-term value for all Hess shareholders."
Hess continued, "On behalf of the entire Board and Company, I would like to thank each of our departing board members - Nicholas Brady, Gregory Hill, Thomas Kean, Samuel Nunn, Frank Olson, and F. Borden Walker - for serving with distinction."
John Pike, Senior Portfolio Manager at Elliott Management said, "We are pleased to welcome a highly-qualified and refreshed board at Hess. In just a few months, we have seen encouraging changes that will benefit all shareholders including the replacement of 9 out of 14 board members and significant value creation for stockholders. As a substantial shareholder, we look forward to continued progress that will unlock further value."
Elliott, which beneficially own more than 4 percent of Hess shares, had strongly advocated for New York-based Hess to conduct a strategic and operational review to consider pathways to maximize shareholder value. This includes implementing a substantial divestment program with a potential spinoff of the Bakken asset to refocus the Hess portfolio, improving operations and accountability, and bringing greater discipline to capital allocation.
In March this year, Hess said it plans to full exit its downstream business and become a pure play exploration and production company. Last Friday, Hess said it will separate the roles of chairman and chief executive officer immediately following the annual meeting of shareholders. Hess chairman and CEO John Hess has offered his full-support for the company's decision.
John Krenicki, former vice chairman of diversified conglomerate General Electric Co. (GE), agreed to serve as the company's non-executive chairman if he is elected together with the other Hess nominees.
In Thursday's regular session, HES is trading at $69.10, down $1.50 or 2.12 percent on a volume of 4.01 million shares.
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