Total is buying Maersk’s oil and gas business in a $7.45 billion deal which the French energy major said would strengthen its operations in the North Sea and boost earnings and cash flow.

For Danish company A.P. Moller Maersk, the sale of Maersk Oil, with reserves equivalent to around one billion barrels of oil, fits with a strategy of focusing on its shipping business and other activities announced last year.

The world’s top oil companies have been back on the takeover trail over the last year, helped by signs of a recovery in the oil market.

Total expects its biggest oil deal since it acquired Elf in 2000 to generate financial synergies of more than $400 million per year, in particular by combining assets in the North Sea.

Total has been betting on new rather than mature fields in the North Sea and the acquisition gives it further economies of scale by making it the second largest player in the region. The deal illustrates Total’s strategy of using a strong balance sheet to acquire attractive assets from competitors having emerged from the prolonged oil downturn stronger than some of its rivals.

“It was time for us to do what a real oil and gas company would do in a period such as this when prices are lower and costs are down. Either launch new projects or else acquire new reserves at attractive prices,” Total Chief Executive Patrick Pouyanne told reporters.

The purchase also signals some oil majors are prepared to invest to replenish reserves and boost production, anticipating an oil price recovery.

With current prices of $50 per barrel most majors are simply struggling to balance their books.

Pouyanne said that Total had proposed a deal to Maersk as an alternative to floating the business.

“There was a debate within Maersk and they finally accepted given that it was attractive and also the fact that an IPO in a tense oil market would not be a right move,” he said, adding that no other oil major was bidding for the assets. Under the terms of the deal, A.P. Moller Maersk will get $4.95 billion in Total shares and Total will assume $2.5 billion of Maersk Oil’s debt.

Maersk said it plans to return a “material portion of the value of the received Total S.A. shares” to shareholders in 2018 and 2019 in the form of extraordinary dividend, share buyback or distribution of shares in Total. Soren Skou, who took charge of Maersk last year, has embarked on a major restructuring to concentrate on its transport and logistics businesses and separate its energy operations in the face of a drop in income.

Skou said he had not decided whether to take up the offer of a seat on the Total board. Analysts at Jefferies said the price was five per cent ahead of its estimates and 18 per cent more than consensus of $6.3 billion.

AP Moller Maersk shares were up 3.7 per cent by 0900 GMT while Total shares dipped 0.7 per cent.

The Danish oil company has access to high-quality fields in the Norwegian and UK North Sea.

Maersk has a 8.44 per cent stake in the giant Johan Sverdrup project led by Norway’s Statoil which is expected to start pumping 440,000 barrels per day in 2019, rising to 660,000 bpd by 2022.

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