Misplaced Pages

Revision as of 13:51, 19 March 2006

The Amerada Hess Corporation NYSE: AHC is an integrated oil company based in New York City. The company explores, produces, transports, and refines oil. Vertically completing the logistical chain, over 1200 filling stations market gas to consumers primarily on the East Coast of the United States. Although towered over in size by enormous global players in the same industry, Amerada Hess places a formidable #139 in the 2004 Fortune 500 ranking.

History

Formed in 1919, the Amerada Corporation was a holding company for its principal subsidiary, the Amerada Petroleum Corporation. The oil producer experienced solid growth during most of the 1920s, hitting a peak in 1926 with a net income of USD 4.9 million. However, in the years leading to the Great Depression, weakness in the oil markets contributed to sluggish profits. The aftermath of the market crash aggravated the unsteady oil industry. In the first quarter of 1930, the company experienced a minor loss. The early years of the Depression was a struggle against wavering demand and overproduction in some regions. Later into the 1930s, the financial forecast became more sanguine for Amerada.

In December 1941, the company reorganized by merging the holding company with the principal operating subsidiary, Amerada Petroleum Corporation, into a simplified operating company. The new entity also adopted the former subsidiary's name.

Robust postwar growth rocketed the company past USD 100 million in sales in 1955.

Hess Oil and Chemical, an oil refiner and marketer, in 1966 acquired 10% of the company for USD 100 million after the British government sold its stake, which was amassed during WWII. Hess and Amerada would announce plans for a merger in December 1968. Some Amerada stockholders led by Morton Adler criticized the arrangement as being too favorable for Hess. Adler argued Amerada's oil reserves would contribute the lion's share of assets for the proposed company, so Amerada stockholders should retain more control of the new company. Before the stockholder vote on the matter, Phillips Petroleum, an integrated oil firm, approached Amerada with its own merger proposal, but the offer was declined in March. Still interested, Phillips nonetheless stated it would not carry out a proxy fight against the proposed Hess deal. Hess fearing such a strategy, cash tender offered USD 140 million for an additional 1.1 million shares of Amerada, which would double its holding in the company. The new shares would be employed in a May stockholder vote deciding the merger's fate. The vote took place amidst shareholder rancor that in addition to echoing Adler's arguments, objected to Amerada's financing of the recently completed tender offer. Hess planned to cancel the shares and the cost of the acquisition would be absorbed by the newly formed company. One shareholder at the meeting quipped, "It looks to me as if Hess is buying Amerada with Amerada's money." Proponents of the deal won, and the USD 2.4 billion merger combining a purely production company with a refinery and marketer operation was completed. Although, controversy was not yet extinguished by the stockholder confirmation. A shareholder filed a class action federal lawsuit in 1972 claiming the proxy vote information was misleading. In 1976, a court agreed that the company falsely claimed to have considered each company's assets as a reason for the merger.

Trivia

• Since 1964, Hess's gas stations have sold a toy truck around Christmastime. Each year, the model changes to a new design. Older models are considered collectibles and typically sell for a few hundred dollars.

References

• Benedict, Roger W. (May 16 1969). "Merger of Amerada Petroleum, Hess Oil, Valued at $2.4 Billion, Voted by Holders". Wall Street Journal, pg 4.
• "Court Rules Amerada's Holders Were Misled In Merger With Hess" (August 2, 1976). Wall Street Journal, p. 4.

External links

• Hess webpage

• Hess store locator

• Companies based in New York City
• Oil companies of the United States