Creator of Christmastime truck toys and gigantic oil company Hess (NYSE:HES) is in a battle with legendary hedge fund Elliot Management, and so far it's benefiting both parties. As part of a reorganization, Elliot wants five seats on the board, in addition to Hess' own picks. In the meantime, the stock is up nearly 50% in the past year, and some analysts believe it's still undervalued by an additional 50%. With major changes on the horizon, should you take a closer look at Hess?

Since amassing a sizable stake in the company, Elliot Management has been publicly critical of the company's management team and strategy. Lately, this has pushed the company to separate its chairman and executive into two different roles, as well as commit to being a pure-play exploration and production firm.

Still, Elliot remains unsatisfied with the company's efforts and has nominated five of its own directors to take seats on the board. Hess initially responded with offering two seats, which Elliot quickly discarded as a "PR Stunt."

Hess has had some operational trouble as of late, mainly the (according to Elliot) $800 million in "capital destruction" from the purchase and subsequent sale of Eagle Ford operations. The hedge fund claims the company hid the true numbers from shareholders via poor disclosure.

There is further support for Elliot's claims. Groups such as Citigroup and Morningstar have cited either Hess' inability to manage capital appropriately or Elliot's superior offering.

Elliot's five nominees are Rodney Chase, former deputy CEO of BP (NYSE:BP); Harvey Golub, former CEO of American Express; Karl Kurz, former COO of Anadarko; David McManus, former EVP of Pioneer; and Mark Smith, former CFO of Ultra. The five nominees undeniably bring a high level of expertise in their respected fields.

Will it happen?
Elliot seems to have quite a bit of momentum going into shareholder elections, and the company has already acquiesced to many of the fund's demands, whether they attribute it directly or not. Given that Hess already offered two board seats as a "please leave us alone" gesture, it may be that management fears Elliot has quite a bit of power of the company.

The election is set for Thursday, and a victory for Elliot will probably send shares higher, but some say the stock remains tremendously undervalued.

Value talk
At the London Value Investor Conference, British investor Michael Price made a bullish case for Hess. In short, he believes Elliot will be victorious, that John Hess will step down from his 17-year tenure at the company, that nonperforming assets will be sold off, and that the company could even split into two. With this in mind and at its current price, he believes the stock is 50% under intrinsic value.

My many metrics, Hess does appear cheap. On an EV/EBITDA basis, the company trades at just a 4.1 ratio. The two-year forward P/E is under 12, and the company trades at just over book value.

BP, for example, trades cheaper on a P/E basis, but more expensive on an EBITDA basis at 5.42.

Investors should look at for further information regarding Elliot Management's analysis and demands of the company. If things go the way many expect on Thursday, Hess may be a great medium-long-term investment for investors in the oil and gas space.