Under fire from activist investor Elliott Management Corp., integrated oil and gas company Hess has turned to its longtime legal advisers from White & Case to handle its largest-ever divestiture.
Hess confirmed Monday that it has agreed to sell its Russian subsidiary Samara-Nafta to Moscow–based energy giant Lukoil for $2.1 billion. The proposed deal is the latest in a series of initiatives Hess has undertaken amid a recent shareholder revolt led by Elliott, an investment vehicle owned by Harvard Law School graduate-turned-billionaire Paul Singer.
White & Case corporate partner Ashley Ballard in London and regional energy and utilities practice cochair Igor Ostapets in Moscow are leading a team from the firm advising New York–based Hess on the transaction.
Assistant general counsel Todd Carpunky is taking the lead in-house on the deal for Hess, whose general counsel since early 2009 has been Timothy Goodell, a former cochair of the global M&A practice at White & Case and an older brother of National Football League commissioner Roger Goodell. (Hess founder Leon Hess owned the NFL’s New York Jets until his death in 1999.)
While at White & Case, Tim Goodell represented the estate of Leon Hess on its $635 million sale of the Jets to pharmaceutical industry heir Woody Johnson in 2000. Goodell and his former White & Case colleagues also handled Hess’s $3.2 billion acquisition of Triton Energy in 2001, and the firm advised Hess again almost a decade later on its $445 million purchase of American Oil & Gas in 2010.
But Hess, still known for its green-and-white tanker trucks, has seen its performance sag in recent years, with Elliott’s Singer publicly lamenting the company’s "unrelenting underperformance" while prodding it to shed assets and shake up its board of directors.
One recent board appointee of whom Elliott has been critical is former U.S. senator and retired King & Spalding partner Samuel Nunn Jr., who was nominated last August along with former U.S. Department of the Treasury general counsel Edith Holiday. (Reporting in February on the close ties between some company directors and the Hess family, Bloomberg noted that Hess chairman and CEO John Hess serves as a trustee for the Center for Strategic and International Studies, while Nunn is chairman of the Washington, D.C.–based think tank.)
The announcement of the proposed Samara-Nafta sale comes about two months after Hess said it planned to sell its terminal network to raise $800 million in cash and about a month after the company unveiled a broader restructuring plan that calls for the sale of additional assets—including a retail gas business that remains popular along the East Coast—and an increased emphasis on oil exploration and production.
Last September, Hess tapped Magic Circle firm Allen & Overy for counsel on the $1 billion sale of Caspian Sea oil assets to an affiliate of India’s state-owned Oil & Natural Gas Corp.— a deal that closed on Monday—and the following month announced the $525 million sale of assets in the North Sea’s Beryl fields to Royal Dutch Shell. (In November, Scott Sherman, a former director of corporate environmental affairs at Hess, joined Bracewell & Giuliani as an environmental regulatory senior counsel in Houston, according to sibling publication Texas Lawyer.)
For its part, Lukoil—one of Russia’s largest oil producers—is poised to further increase its operations in its home country by picking up Hess’s 90 percent stake in Samara-Nafta. The company has turned to Akin Gump Strauss Hauer & Feld as lead counsel on the acquisition.
An Akin Gump spokesman was unable to provide The Am Law Daily with the names of the lead lawyers from the firm working on the matter. Akin Gump advised Lukoil on its $3.4 billion repurchase of a 20 percent stake in the company held by ConocoPhillips in 2010, according to our previous reports. Michael Lewis serves as chief legal officer for Lukoil’s North American unit.
Records on file with the U.S. Senate show that Akin Gump has also handled lobbying work for Hess, with the company paying the firm $310,000 for its services in 2012. Hess paid another $300,000 in lobbying-related fees to Ogilvy Government Relations through the first eight months of last year.
Senate records also reveal that Hess terminated its contract with Ogilvy in October, the same month that Akin Gump hired former Ogilvy lobbyist Ryan Thompson, who had done lobbying work for Hess, as a senior policy adviser in Washington, D.C., according to sibling publication The Blog of Legal Times.
Hess management faces its next real challenge on May 16, when Singer’s Elliott group of hedge funds plans to use their 4.4 percent stake in the company to nominate five board directors at an annual shareholders meeting. In anticipation of the looming battle, Hess urged its shareholders to reject Singer’s candidates last week and touted the credentials of its own nominees.
Earlier this month, San Diego-based activist hedge fund Relational Investors implored Hess to talk with Elliott, although a peace offering never materialized. Relational, whose chief compliance officer and senior legal cousel is Kathleen Carney, subsequently announced that it would support Elliott’s nominees to the Hess board.
Late last year, Elliott turned to Paul, Weiss, Rifkind, Wharton & Garrison for counsel on its $2.3 billion takeover bid for Compuware, according to our previous reports. Compuware, a business software maker, rejected the offer earlier this year but has since put itself up for sale.