China Oceanwide's chairman says his company is committed to
closing the transaction as soon as possible.
Genworth Financial
Inc. says China Oceanwide Holdings Group Co. Ltd. of Beijing is having trouble
nailing down the financing it needs to pay to acquire Genworth.
China Oceanwide — a financial services and
real estate development company based in Beijing — has been trying to
acquire Genworth for about four years. The company is in the process of
closing on a $1.8 billion financing arrangement from Hony Capital, a big, Hong
Kong-based private equity firm.
“Oceanwide has indicated that the financing
has been delayed due to the COVID-19 pandemic and uncertain macroeconomic
conditions,” Genworth said in a comment included in the financing delay
announcement.
China Oceanwide has major developments in the
center of Wuhan, which was hit especially hard by the COVID-19 outbreak.
Genworth and China Oceanwide said they will
push the deal completion deadline back to Sept. 30, from June 30.
The extension is the 15th the companies have
announced.
Genworth is a Richmond, Virginia-based company
that is a large player in the mortgage insurance markets in the United States
and Australia.
It sells some stand-alone long-term care
insurance (LTCI), and it has been a major player in the life, annuity and LTCI
markets.
The company has $1 billion in debt coming due
in 2021 and potential liabilities related to litigation with AXA.
Because of the delay in the China Oceanwide
deal closing, Genworth is preparing to handle the payments by borrowing money,
and, possibly, by selling a 19.9% stake in the U.S. mortgage insurance business
to the public, through an initial public offering, Genworth said.
The new deal extension calls for China
Oceanwide to show Genworth, by Aug. 31, that China Oceanwide has $1 billion in
funding from sources in China to pay for the deal, and $1 billion in financing
from Hony Capital or other sources.
“If these conditions are met, the merger
agreement will remain in place until Sept. 30, 2020. If the conditions are not
met, Genworth has the right, in its sole discretion, to terminate the merger
agreement as of Aug. 31, 2020,” according to the extension announcement.
Thomas McInerney, Genworth’s chief executive
officer, said in a comment on the deal extension that the company heard
stakeholders would like greater assurance that the China Oceanwide deal is
moving toward closing.
The financing confirmation provision should
address that concern, McInerney said.
“We continue to believe the transaction
represents the best and most certain value for Genworth’s shareholders,”
McInerney said.
Lu Zhiqiang, the chairman of China Oceanwide,
said in a comment of his own that he’s still committed to the deal.
“We have overcome many hurdles during the past
three and half years and continue to persevere because of the future value of
Genworth to our vision of pursuing the significant opportunities for long term
care (LTC) insurance in the U.S., China and the rest of Asia,” Lu said. “We
remain committed to securing financing for the transaction in order to close
the transaction as soon as possible.”
Correction: An earlier version of this article
described Genworth’s mortgage insurance business incorrectly. It has operations
in Australia.
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