Hess Corporation Prices Concurrent Offerings of Common Stock and Depositary Shares Representing an Interest in Mandatory Convertible Preferred Stock
Hess Corporation (NYSE:HES) today announced the pricing of its
previously announced concurrent underwritten public offerings of
25,000,000 shares of its common stock at a price of $39.00 per share,
and 10,000,000 depositary shares, each of which represents a 1/20th
interest in a share of its 8.00% Series A Mandatory Convertible
Preferred Stock (the “Convertible Preferred Stock”), $1.00 par value per
share, with a liquidation preference of $1,000 per share of Convertible
Preferred Stock (equivalent to $50 per depositary share), at a price of
$50 per depositary share. In addition, the underwriters in each
respective offering have been granted a 30-day option to purchase up to
3,750,000 additional shares of common stock and up to 1,500,000
additional depositary shares. The common stock offering and the
depositary shares offering are separate public offerings by means of
separate prospectus supplements and are not contingent on one another.
The net proceeds from the common stock offering and the depositary
shares offering will be approximately $945.8 million and $485.3 million,
respectively, in each case after deducting underwriting discounts and
commissions and before estimated offering expenses payable by Hess.
Hess plans to use the net proceeds from these offerings to strengthen
the Company’s balance sheet and for general corporate purposes including
funding its longer term capital needs and the cost of the capped call
transactions described below. The concurrent offerings are expected to
close on February 10, 2016, subject to customary closing conditions.
The depositary shares entitle the holders, through the bank depositary,
to a proportional fractional interest in the rights and preferences of
the Convertible Preferred Stock, including conversion, dividend,
liquidation and voting rights, subject to certain limited exceptions.
Unless converted earlier at the option of the holders, on or around
February 1, 2019, each share of Convertible Preferred Stock will
automatically convert into between 21.8220 and 25.6420 shares of Hess’
common stock (and, correspondingly, the conversion rate for each
depositary share will be between 1.0911 and 1.2821 shares of Hess’
common stock), subject to customary anti-dilution adjustments, depending
on the volume-weighted average price of Hess’ common stock over a 20
trading day averaging period prior to that date. Dividends on the
Convertible Preferred Stock will be payable on a cumulative basis when,
as and if declared by Hess’ board of directors, at an annual rate of
8.00% on the liquidation preference of $1,000 per share of Convertible
Preferred Stock (or $50 per depositary share), on February 1, May 1,
August 1 and November 1 of each year, commencing on May 1, 2016 and
ending on, and including, February 1, 2019.
Goldman, Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley &
Co. LLC are acting as book-running managers for the concurrent offerings.
In connection with the pricing of the depositary shares, Hess entered
into privately negotiated capped call transactions with one or more of
the underwriters or their affiliates (the “option counterparties”). The
capped call transactions are expected generally to reduce the potential
dilution to Hess’ common stock upon conversion of the Convertible
Preferred Stock, with such reduction subject to a cap. The cap price of
the capped call transactions will initially be $53.6250 per share of
Hess’ common stock, representing a premium of 37.5% above the public
offering price of Hess' common stock in the concurrent common stock
offering, and is subject to certain adjustments under the terms of the
capped call transactions. If the underwriters of the depositary shares
offering exercise their over-allotment option, Hess intends to enter
into additional capped call transactions with the option counterparties.
In connection with establishing their initial hedge of the capped call
transactions, the option counterparties or their respective affiliates
expect to enter into various derivative transactions with respect to
Hess’ common stock concurrently with, or shortly after, the pricing of
the depositary shares. These activities could increase (or reduce the
size of any decrease in) the market price of Hess’ common stock or the
depositary shares at that time.
In addition, the option counterparties or their respective affiliates
may modify their hedge positions by entering into or unwinding
derivative transactions with respect to Hess’ common stock and/or by
purchasing or selling shares of Hess’ common stock or other securities
of Hess in secondary market transactions following the pricing of the
depositary shares and prior to the mandatory conversion date of the
Convertible Preferred Stock (and are likely to do so during the final
averaging period relating to the mandatory conversion of the Convertible
Preferred Stock). This activity could also cause or avoid an increase or
a decrease in the market price of Hess’ common stock or the depositary
shares, which could affect the value of the shares of Hess’ common stock
that a holder of depositary shares will receive upon conversion of the
Convertible Preferred Stock and, to the extent the activity occurs
during the final averaging period relating to the mandatory conversion
of the Convertible Preferred Stock, it could also affect the number of
shares of Hess’ common stock that a holder of depositary shares will
receive upon conversion.
The common stock and depositary shares are being offered pursuant to an
effective shelf registration statement on Form S-3 that was previously
filed with the Securities and Exchange Commission (“SEC”). Currently, no
public market exists for the depositary shares. Hess intends to apply to
list the depositary shares on The New York Stock Exchange under the
symbol “HES.PRA.” If the application is approved, Hess expects trading
of the depositary shares on The New York Stock Exchange to commence
within 30 days after the initial delivery of the depositary shares.
Hess has filed a registration statement (including a prospectus and a
preliminary prospectus supplement) with the SEC for each of the
offerings to which this press release relates. Before you invest, you
should read the prospectuses and the preliminary prospectus supplements
in that registration statement and other documents Hess has filed with
the SEC for more complete information about the issuer and the offering.
You may get these documents for free by visiting EDGAR on the SEC
website at www.sec.gov.
Alternatively, copies of the prospectus and the preliminary prospectus
supplement relating to the offering may be obtained from Goldman, Sachs
& Co., c/o Prospectus Department, 200 West Street, New York, NY 10282,
by calling (866) 471-2526 or by email at prospectus-ny@ny.email.gs.com;
Morgan Stanley & Co. LLC at 180 Varick Street, 2nd Floor,
New York, NY 10014, Attention: Prospectus Department; or J.P. Morgan
Securities LLC c/o Broadridge Financial Solutions, 1155 Long Island
Avenue Edgewood, NY 11717 or by calling (866) 803-9204 or by email at prospectus-eq_fi@jpm.com.
About Hess Corporation
Hess Corporation is a leading global independent energy company engaged
in the exploration and production of crude oil and natural gas.
Cautionary Statements
This news release contains statements about future events and
expectations, or “forward-looking statements,” all of which are
inherently uncertain. These forward-looking statements are based on
management’s current expectations and assumptions and not on historical
facts. Examples of these statements include, but are not limited to, our
ability to complete the offerings and the expected timing for
completion, the anticipated use of proceeds from the offerings, the
expected impact of the capped calls and the expected actions of the
option counterparties, our intention to list the depositary shares on
The New York Stock Exchange and the date trading on The New York Stock
Exchange is expected to commence. These forward-looking statements are
subject to a number of risks and uncertainties that could cause actual
results to differ materially from those indicated in such
forward-looking statements including prevailing market conditions and
other factors. For more information about potential risk factors that
could affect Hess and its results, we refer you to the information
contained in each prospectus and prospectus supplement for the
respective offerings and the risk factors summarized in our Form 10-K
for the year ended December 31, 2014. Hess undertakes no obligation to
update the information contained in this press release to reflect
subsequently occurring events or circumstances.
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