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Megamergers on the Rise: Chevron and T-Mobile Lead New Deals

Stavros Tousios | Wednesday 29 May 2024

While the Nasdaq (NQ) continued soaring to new highs on Tuesday, May 28, Mergers and Acquisitions (M&As) came back into the spotlight with the Hess (HES) board approving Chevron's (CVX) $53 billion bid after months of waiting. However, based on how their stock prices performed, the chances of this deal eventually going through are still at odds. 

In a separate, perhaps less complex technology megadeal also Tuesday, T-Mobile (TMUS) stock rose over 1% on the news it would acquire most of US Cellular operations in a $4.4 billion deal, while the former stock price jumped over 5%. 

Interestingly, Goldman Sachs (GS) predicted M&A trends in 2024 will include growth in technology, healthcare, AI and cross-border deals. 

Moreover, S&P Global data for Q1 2024 show global M&A activity reached $549 billion, a 28% increase year-on-year (YOY). Despite transactions declining, growth was attributed to megadeals, where buyers purchased majority stakes. Let’s take a closer look:

an image of two men shaking hands and sealing a deal

Deals Moving Forward

Players from the oil and gas industry announced a few months back that M&As have totalled $190 billion. Some notable examples include Diamondback (FANG) acquiring Endeavor Energy for $26 billion, ConocoPhillips (COP) paying $35.6 billion for Burlington Resources and recently Exxon Mobil (XOM) completing the all-stock transaction of Pioneer Natural Resources (PXD) valued at $59.5 billion. But there is more.

Chevron-Hess Deal Passes First Hurdle

Chevron signed a $53 billion deal to acquire Hess last year, but apparently, shareholders were split on whether to approve it in a vote leading up to Tuesday, May 28. 

Despite some abstaining from voting and arguing the premium was too low,  the deal took a favourable turn after the majority approved it. 

Still, the deal requires regulatory approval from the Federal Trade Commission (FTC) and also faces an arbitration battle with Exxon and CNOOC (0883.HK), Hess' partners in Guyana. Notably, Exxon has not ruled out a potential bid for Hess' Guyana assets.

The merger between Hess and Chevron is expected to give access to Hess' profitable oil fields in Guyana. While the actual results of this are yet to be determined, the merger is expected to help diversify and grow Chevron's operations and offset the cost overruns it has experienced in its Australian LNG projects. Hess shareholders will own nearly 15% of a much larger Chevron and gain access to the company's higher dividend.

T-Mobile Makes Move to Expand Network

T-Mobile has agreed to acquire most of US Cellular operations, one of the last major regional wireless carriers, and 30% of its radio spectrum assets for $2.4 billion in cash and $2 billion in debt. Cellular will keep its cellphone towers, most of its spectrum licenses and joint ventures with Verizon (VZ) as part of the deal. Verizon has reportedly been in talks with US Cellular and its parent company, Telephone & Data Systems. 

Many analysts believe that this could be a good deal for T-Mobile, as it will gain access to US Cellular's spectrum assets at a low price and can improve profits by integrating operations, its network capacity, speed, and coverage as competition intensifies. Nonetheless, only time will reveal the actual results of this deal.

Regulatory Challenges and Pushback

It is important to keep in mind that deals and mergers can face challenges like regulatory scrutiny, legal disputes, and political opposition.

For example, last year, 50 Democratic members of Congress went as far as to write to the FTC chair to urge more scrutiny of oil and energy deals to prevent higher energy prices and reduced competition. As a result, the FTC has requested more details about the Exxon and Chevron deals despite industry groups arguing the deals do not impact supply and demand dynamics or the industry's ability to meet demand.  

Chevron still faces regulatory approval from the FTC and the arbitration challenge from Exxon Mobil over rights to the offshore project in Guyana. Exxon claims it has the right of first refusal to buy Hess's 30% stake in the Guyana project and is already challenging the Chevron deal. The arbitration case is expected to take several months from now. If it does not confirm that Exxon's right of first refusal does not apply to the merger deal, the merger will not close. Chevron expressed confidence that it would prevail in the Guyana arbitration and complete the Hess deal.

In T-Mobile's case, although the company will gain around 4.5 million US Cellular customers, a great risk is the one with no guarantee that they will stay with T-Mobile after the acquisition. The deal also faces regulatory hurdles due to potential spectrum concentration issues in some areas, which regulators will heavily scrutinise.


With Chevron poised to diversify its operations and strengthen its footprint in Guyana and T-Mobile set to expand its network capacity and customer base, these M&As may have significant implications for their respective industries and stock prices. 

Despite the challenges of closing the transactions, the outcome will likely set precedents for future deals and reshape market dynamics and investor perception.

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