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Toshiba exiting US LNG business
Posted on Thursday, 08 November 2018 10:01
Japanese conglomerate Toshiba is to offload its US liquefied natural gas business (LNG) to ENN Ecological Holdings in a bid to jettison assets which are losing money. Under the terms of the transaction and in an interesting turn, the Tokyo-headquartered vendor will pay the buyer USD 821.00 million to take the unit off its hands after the acquiror pays an initial consideration of USD 15.00 million. Toshiba opted to sell the division following a strategic review, as part of which it deemed the unit, known as Toshiba America LNG Corporation and established in 2017, as a non-core asset with few synergies with its other operations. The vendor said it was also at risk of future losses from the target assets as a consequence of continuing deteriorations in market conditions and concluded that a divestment would maximise corporate value. Completion of the deal remains subject to the approval of certain governmental authorities and is expected to occur by 31st March 2019. Upon closing, all contracts relating to the sale of LNG in the US will either be transferred to ENN or cancelled. Toshiba noted that, prior to reaching an agreement with ENN, it had invited bids from other Japanese and international LNG companies, large-scale utility firms and financial institutions and received offers from a number of potential suitors. Reuters noted that the group’s decision to move into LNG confused analysts when it was announced in 2013, with many citing the firm’s lack of shipping experience as a factor leading to scepticism. Junzo Tamamizu, managing partner of Clavis Energy Partners, told the news provider that Toshiba most likely hoped to increase the value of its power plants business through the diversification. There have so far been 130 deals targeting natural gas distribution companies announced worldwide in 2018, according to Zephyr, the M&A database published by Bureau van Dijk. Of these, the largest was worth USD 8.48 billion and involved CenterPoint Energy acquiring US-headquartered Vectren, while second place saw Nextera Energy pay USD 6.48 billion to pick up Gulf Power, Florida City Gas and other certain Floridian assets from the Southern Company. © Zephus Ltd