TOKYO/HONG KONG (Reuters) - China’s ENN Ecological Holdings Co said on Thursday it would scrap a deal to buy Toshiba’s U.S. liquefied natural gas business due to a failure to obtain approvals from shareholders and a U.S. panel that monitors foreign investments.
The cancellation is a new blow to Toshiba, the once-mighty Japanese conglomerate, as it must look for a new buyer for the business that it previously said could potentially cause losses as much as 1 trillion yen ($9 billion).
A failure to find a buyer could derail Toshiba’s recovery from the fallout of the bankruptcy of its U.S. nuclear power unit Westinghouse.
In a separate statement, Toshiba said it was informed by ENN late on Wednesday that the board of the Chinese company had decided to terminate the purchase and sales agreement for the deal, and the decision would be submitted for approval at an extraordinary general meeting of ENN’s shareholders on April 29.
The reasons for ENN’s cancellation were that the deal was not completed by the March-end closing due date stated in the agreement and that the required conditions could not be met in a short time, leading to considerable uncertainty in proceeding with the transfer process, Toshiba said.
Toshiba has not yet received an official document from ENN on the termination, which is needed to make it effective, but it will take all steps to get a full understanding of the situation to decide on future plans for the LNG business, it added.
Toshiba in November agreed to pay ENN more than $800 million to take over its LNG business in the United States as part of a plan to shed money-losing assets.
Toshiba said earlier this month the deal had been delayed because it had not yet received approval from the Committee on Foreign Investment in the United States (CFIUS) because of the U.S. government shutdown earlier this year.
In February, Toshiba said it expected to book a 93 billion yen ($837 million) loss related to the deal in the year ended March 31, but it now needs to review and decide the impact from the LNG business, the company said.
Reporting by Yuka Obayashi and Makiko Yamazaki in TOKYO, Twinnie Siu in HONG KONG; Additional reporting by Tetsushi Kajimoto; Editing by Jane Merriman and David Evans