Total and Toshiba agree U.S. LNG purchase after Chinese buyer backed out of deal

Total SA is set to take over Toshiba’s U.S. LNG (liquefied natural gas) business, with part of the deal being that the Japanese group will give the French company $800 million cash.

The announcement was released by the two business giants on Saturday, coming just weeks after multiple attempts to have Chinese buyer take over failed.

Total is expected to pay $15 million to buy the businesses’ Texan assets, with Toshiba paying Total $815 million for it to also take up all contracts associated with the LNG business.

Toshiba has previously explained that its LNG operations in the United States could lead to losses for the company, estimated to be as high as 1 trillion yen (or roughly $9.2 billion).

It is understood that the Japanese company had a binding agreement that meant it would have to pay Freeport LNG processing fee for liquefied natural gas for more than 20 years. The contract stated the fee was fixed, regardless of whether Toshiba would or would not find buyers at prevailing rates.

The deal presents the French company with an opportunity to further grow its LNG portfolio. It also comes less than a month after Total sought to acquire the African assets of oil company Anadarko for $8.8 billion. The assets in question also comprise an LNG project located in Mozambique.

Total SA said in a press statement that taking over of the Japanese company’s LNG portfolio was part of its broader quest to emerge as one of the leading LNG portfolio players.

According to the company, the purchase will likely add LNG in the region of 2.2 million tonnes annually. With this, the company will be able to optimize supply as well as the operations.

The transaction will be settled by the end of March 2020 after the firms get the necessary regulatory approvals. Toshiba also expects to have booked a related loss amounting to 93 billion yen ($858 million).

Toshiba’s U.S. LNG business was initially poised for takeover by China’s ENN Ecological Holdings Co.

The firm had indicated interest in buying the business last year but backed out in April. ENN said at the time that its reasons for scrapping the purchase plans related to its failure to secure necessary approvals from its shareholders as well as from a relevant U.S. panel.