Merger arbitrage hedge funds including Citadel Advisors, Adage Capital Management, and HBK Investments, are cashing in on one of the year’s most lucrative event-driven plays, as Chevron’s long-delayed $53bn acquisition of Hess Corp finally closed, according to a report by Bloomberg.
The closure, which came following a favourable arbitration ruling, marks a major victory for the hedge funds who maintained conviction in the face of prolonged uncertainty. The arbitration panel’s decision in Chevron’s favour removed a key obstacle – a challenge from Exxon Mobil Corp over preemptive rights tied to Hess’s stake in a Guyana oil field.
The payout is significant with merger arbitrage hedge funds collectively holding approximately $10bn in Hess stock at the end of March, according to Morgan Stanley data. Hess was the most widely held name across US merger arb portfolios, making this a sector-defining trade.
Adage Capital topped the list of winners with a Hess position worth over $1.5bn based on Q1 holdings. Citadel Advisors and HBK Investments each held more than $1bn in exposure, while Pentwater Capital and DE Shaw also stood to gain from the deal’s completion.
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