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Analysts muse: Could Hess Corp. be acquired?

By Bob Downing Published: April 2, 2013

From Bloomberg News:

By Inyoung Hwang

April 1 (Bloomberg) -- Hess Corp., a New York-based energy company, may be acquired at $80 to $90 a share, according to MFP Investors LLC’s Michael Price.

"Hess is sitting there with trophy assets, huge position in the Bakkens," Price said in a "Bloomberg Surveillance" television interview with Tom Keene and Sara Eisen today. "Somebody could surface and just pop an $80 to $90 bid."

Hess announced today an agreement to sell its holding in Russian subsidiary Samara-Nafta for $2.05 billion to OAO Lukoil. It expects to get about $1.8 billion in after-tax proceeds for the 90 percent stake, Hess said in a statement.

The move comes after Hess announced plans earlier this year to exit certain businesses as it transforms into an exploration and production company. The second-largest Hess shareholder, Paul Singer’s Elliott Management Corp., said in January that the company should sell assets and bring in new board members after years of "unrelenting underperformance." Hess has rejected Elliott’s nominees and proposed its own slate of six new board members.

Hess jumped 2.7 percent to $73.54 in New York today. While the stock has surged 84 percent since its June 25 low, the shares are still down 45 percent from the May 2008 all-time high of $133.80.

With a new board, the energy company may be at a point "where you might get the right changes," said Price, who made his reputation as a value investor in the 1980s by buying shares of beaten-down lenders.

’Big Mistake’

Price said his investment in J.C. Penney Co. stock has been "a big mistake." He said he also bought the company’s bonds as debt prices fell.

Shares of the department-store company plunged 66 percent since its February 2012 high as sales tumbled in the first year of a transformation plan under Chief Executive Officer Ron Johnson. Developer Steven Roth sold last month more than 40 percent of the J.C. Penney shares that his Vornado Realty Trust acquired in conjunction with hedge-fund manager Bill Ackman’s Pershing Square Capital Management LP in 2010.

"We bought some behind Vornado and Ackman and on the theory of a turnaround in management, maybe a helping economy, tailwind and some real estate value, and we were wrong," Price said.

J.C. Penney shares fell 2.1 percent to $14.80 today.

The rally in equities may "get tired at some point," Price said. The Standard & Poor’s 500 Index has advanced 22 percent since its June low last year and surpassed its record last week of 1,565.15. The benchmark index fell 0.5 percent to 1,562.17 today.

He said he is "not even close" to buying Apple Inc. shares even after the maker of iPhones and iPads tumbled 19 percent this year.

"Apple is still 50 to 70 points away from where I would even care," Price said.

 

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