Genworth to Shift to China Oceanwide Deal Backup Plan

Thomas McInerney, president and chief executive officer of Genworth Financial Inc., listens to a question during a Bloomberg Television interview in New York, U.S., on Friday, June 27, 2014.

Genworth Financial Inc. and China Oceanwide Holdings Group Co. Ltd. today said they will shift to using a merger agreement without an end date.

Genworth said it will begin executing a plan that serves as an alternative to the company being acquired by China Oceanwide. China Oceanwide has been trying to acquire Genworth since October 2016, in a deal with an estimated value of about $2.7 billion.

"Oceanwide has shared that it will continue to work towards closing the transaction, and Genworth remains open to completing the transaction if Oceanwide completes the remaining steps," the companies said in a new announcement.

Either party can terminate the merger agreement at any time, the companies said.

The companies' previous deal agreement, which was the 17th, expired Thursday.

Thomas McInerney, Genworth's chief executive officer, said in a comment that Genworth and China Oceanwide "retain the ability to ultimately complete the transaction if Oceanwide can secure the required funding and the parties can complete the remaining steps to closing, and if the transaction is still in the best interests of Genworth at that time."

Lu Zhiqiang, China Oceanwide's chairman, said, "We believe the value of the transaction is significant for both parties' stakeholders, and are continuing to work towards completing the transaction with Genworth."

Genworth is a Richmond, Virginia-based insurer that has been a major issuer of life insurance and annuities, helped create the U.S. long-term care insurance (LTCI) market, and it continues to be a major mortgage insurance provider. It continues to write some LTCI coverage and still has large closed blocks of life insurance and annuity business.

China Oceanwide is a Beijing-based real estate developer and financial services company.

Deal Deadline Extensions

For about three years, the companies attributed deal deadline extensions to delays in efforts to get regulatory approvals.

In the past year, the companies have attributed deadline extensions to delays caused by the COVID-19 pandemic, and to the need for China Oceanwide to finalize financing arrangements with Hony Capital, an investment firm that's part of the same corporate family that controls Lenovo.

China Oceanwide has been trying to sell Oceanwide Center, a 2 million-square-foot commercial real estate project in San Francisco, to Hony since March, a deal which has been delayed several times. On Thursday, China Oceanwide announced it has terminated that asset sale agreement with Hony, attributing the termination to the effects of the COVID-19 pandemic on efforts to meet "due diligence" information-gathering requirements.

Genworth's Contingency Plan

Genworth said its contingency plan could lead to the sale of a stake in its U.S. mortgage insurance business to the public, through a partial initial public offering.

The firm could use proceeds from the IPO to pay about $1 billion in debt that's maturing this year, the company said.

Any mortgage insurance unit IPO "will be subject to market conditions as well as the satisfaction of various conditions and approvals," Genworth said.

Genworth said it has about $1 billion in cash and liquid assets, including $340 million ready to pay holders of senior notes that mature in February.

The insurer said the contingency plan calls for the company "to further align the company's expense structure with its business activities."

"As previously disclosed, Genworth intends to manage the U.S. life insurance companies on a stand-alone basis with no plans to infuse capital into those companies in the future, absent an Oceanwide transaction," Genworth said.

— Read Genworth Aims to Line Up Backup Financing Options, on ThinkAdvisor.

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