The Rising Influence of Rising Affluence

[DewDiligence]

HES +10% today (+17% past 2 days) on activist shareholder’s claim that company is worth $126/sh; here are excerpts from Elliott’s “Dear Shareholder” letter:

http://finance.yahoo.com/news/elliott-management-nominate-five-highly-130200440.html

January 29, 2013

Dear Fellow Shareholder:

We are writing to you on behalf of Elliott Associates, L.P. and Elliott International, L.P. (together, “Elliott” or “we”), collectively the beneficial owners of 4% of the common stock of Hess Corporation (“Hess” or the “Company”). After extensive study and analysis, we are convinced that tremendous value is trapped inside the Company as a result of poor oversight by a board of directors lacking both the experience and independence to set a clear, shareholder-focused, value-creating strategy. As a result, we have identified and are submitting for election at the Company’s 2013 Annual Meeting a slate of five independent, highly qualified nominees to join Hess’s board. The Nominees each bring substantial expertise and deep experience and were selected specifically for their ability to foster the boardroom dynamics that are required to unlock the Company’s enormous potential.

We believe that unlocking this trapped value could result in a share price of greater than $126 per share [emphasis in original text], amounting to upside of over 150%, or $26 billion of enterprise value creation.

Our investment in Hess Corporation is Elliott’s largest initial equity investment in its more than 35 year history. The size of the position reflects our conviction that, with proper oversight and guidance from the Shareholder Nominees, tremendous value can be unlocked.

Elliott’s letter goes on to recommend spinning off HES’ Bakken assets and selling the remaining downstream/midstream businesses (the retail gas stations, retail marketing and convenience stores). Elliott’s $126/sh figure strikes me as high, but not necessarily unattainable. HES has tremendous assets; in a competitive bidding situation, the bids would start north of $100, IMHO.