Genworth deal extended again, but parties are looking to close in May

Register now

The latest deadline for Genworth Financial's acquisition by China Oceanwide is June 30, but the parties are looking to get the transaction completed by the end of next month.

It is the 14th time the deal deadline has been pushed forward since it was announced over three years ago. However, a pair of regulatory reapprovals received in late March might be among the last dominoes that need to fall in order to get it done.

The latest the deal could close under the most recent extension is June 30, but the parties believe it can be consummated near the end of May, according to a Genworth press release. However, given the coronavirus-related volatility and reduced liquidity in the market, both companies felt it was prudent to build in an additional one-month cushion.

China Oceanwide's arrangement to receive $1.8 billion in debt funding to partially finance the transaction through Hony Capital was extended until June 30 as well, the companies said in a subsequent announcement.

The previous extension expired on March 31.

With the latest deadline change, China Oceanwide waived Genworth's ongoing compliance with certain covenants set forth in the merger agreement. The waiver also included termination rights for China Oceanwide if regulators subsequently impose materially adverse conditions on the transaction, and other mutual termination rights for the parties.

But at least insurance regulators in New York and Virginia formally reapproved the deal, clearing most of the final hurdles to a long-awaited transaction that was first announced in October 2016.

The reapprovals involved life insurance units domiciled in each state. New York's reapproval was announced on March 24; its original approval expired one year ago.

Virginia's reapproval was announced in the same release as the latest extension.

Earlier this year, Fannie Mae and Freddie Mac reapproved the deal.

Among the items necessitating the reapprovals was Genworth's sale of the majority stake in its Canadian mortgage insurance business because regulators there had not acted on the deal.

Its domestic MI business initially suffered as the deal dragged on, but Genworth has since regained its status as the fourth largest of the six active underwriters with $18.1 billion in new insurance written during the fourth quarter, almost double the $9.3 billion for the same period in 2018.

Once the financing plan is finalized, China Oceanwide will discuss currency conversion and transfer of funds with China's State Administration of Foreign Exchange. It is also seeking confirmation from the Delaware Department of Insurance that the acquisition of Genworth's Delaware domiciled insurer may proceed under the existing approval, which China Oceanwide expects to receive upon finalization of its financing.

"Like Oceanwide, Genworth remains fully committed to closing the transaction as soon as possible. The parties are very pleased with the progress made in receiving approval from the New York and Virginia regulators," Tom McInerney, Genworth's president and CEO, said in a press release. "We understand the necessity of the current extension in light of the unprecedented challenges in global financial markets."

For reprint and licensing requests for this article, click here.
M&A PMI Genworth China GSEs Coronavirus