April 17, 2021

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Mortgage News

Genworth Axes $2.7B Merger Deal With China-Based Company

More than four years after it was first announced, Genworth Financial Inc.’s plan to sell itself to a China-based investment company is officially dead.

Henrico County-based insurance giant announced Tuesday that it had terminated its merger agreement with China Oceanwide Holdings Group Co. Ltd., a Beijing-based company that agreed in October 2016 to sell Genworth for approximately $ 2.7 billion or to buy $ 5.43 per share in cash.

The deal was later finalized in years of regulatory reviews in the US and Canada, forcing Genworth and China Oceanwide to delay closing the deal 17 times.

Genworth ultimately removed all federal and state regulatory hurdles and sold its Canadian subsidiary to avoid further delays in government approval.

However, China Oceanwide was unable to submit a financing package to complete the acquisition late last year. The companies did this in part due to disruptions caused by the coronavirus pandemic.

The termination of the merger comes three months after the companies announced in early January that they had suspended the deal indefinitely, although at the time both companies said they might still be able to close the deal if the business environment improved .

The termination of the contract will allow the Fortune 500 company to continue its revised strategic plan without restrictions, Genworth said.

When the acquisition was put on hold indefinitely in January, Genworth announced that it will pursue additional strategic options to help the company pay off approximately $ 1 billion in debt the company owes this year. This revised strategic plan includes a possible partial IPO of its shares for the US mortgage insurance business.

China Oceanwide and Genworth will continue to explore ways to bring long-term care insurance and related products to the Chinese insurance market.

Tom McInerney, President and Chief Executive Officer of Genworth, said Tuesday that it was “necessary and appropriate at this time to terminate the transaction,” but believed the possibility that Genworth could continue to work with China Oceanwide for the long term to find a new market for long-term care insurance in China.

“Both parties believe there are significant and compelling ways to meet critical societal needs outside of the United States,” he said.

Genworth, a mortgage and long-term care insurance seller, employs thousands in Virginia, primarily in the Richmond area and Lynchburg.

Genworth has faced numerous business challenges over the past decade, having initially struggled to recover from the housing market collapse and the Great Recession of 2007-2009, which affected the home mortgage insurance business, which covers home loan defaults.

While that business has recovered, Genworth has also posted losses in its long-term care insurance business, which provides insurance for nursing homes and home care. In view of the rising costs of care, the company has responded by increasing the premiums for care insurance.

With the company’s stock value still well below its pre-economic recession levels more than 10 years ago, Genworth executives and board members have long defended the proposed acquisition by China Oceanwide as the “best option” to appeal to the company’s shareholders and shareholders potentially offering value will open up a new market for its insurance products in China.

Genworth’s shares rose 3 cents, or 0.86%, to trade at $ 3.51. The cancellation notices were published after the market closed.

“The Genworth Board of Directors has determined that Oceanwide will not be able to complete the proposed transaction in a timely manner and that more clarity is needed now about Genworth’s future in order for the company to execute on its plans to maximize shareholder value,” says James Riepe. Genworth’s non-executive chairman of the board said in a statement Tuesday.

“Therefore, the board of directors has decided to terminate the Oceanwide merger agreement,” said Riepe. “Although I am disappointed after more than four years of effort, I would particularly like to thank our shareholders, regulators, policyholders, customers and employees for their patience and support.” All of them went through a particularly long and arduous cross-border approval process. “

Riepe is one of three Genworth directors who have announced that they will be stepping down from the company’s board of directors after the annual general meeting scheduled for May 20. Genworth has announced three new board members.

The failure of the acquisition has already resulted in downsizing at Genworth. At the end of January, the company announced that it had laid off 95 employees from its corporate headquarters in Henrico.

Timeline

1871: The Life Insurance Company of Virginia, known as Life of Virginia, was founded by two dozen investors in Petersburg and offered their first policies to local customers. The company later expanded and moved its headquarters to Richmond.

1927: The company added pensions to its portfolio.

1961: The company has expanded its insurance offering to include mortgage insurance.

1967: Richmond Corp. was established as the holding company for Life of Virginia and Lawyers Title Insurance Corp. founded.

1974: The company now offers long-term care insurance.

1977: Richmond Corp. was sold to Continental Group Inc. for $ 370 million to form Richmond Co., later known as Continental Financial Services Co.

1984: Richmond-based Universal Leaf Tobacco Co. Inc. has acquired the legal title from Continental Financial Services for US $ 115 million. Universal Corp. hived off Lawyers Title as an independent company in 1991.

1986: Combined Insurance, a Chicago-based holding company, bought Life of Virginia for $ 557 million and became AON Corp. the following year.

1996: GE Capital, General Electric’s financial services unit, announced plans to purchase most of the life insurance business of AON Corp. including Life of Virginia. Under GE Capital, Life of Virginia became part of GE Financial Assurance Holdings Inc. before becoming GE Capital Assurance Co.

1997: GE Financial Assurance moved its headquarters from Stamford, Connecticut to the Brookfield office complex in western Henrico County.

October 2003: Genworth Financial was formed through the joining of several GE Capital insurance companies.

May 2004: Genworth went public on the New York Stock Exchange in an initial public offering of $ 2.8 billion at a price of $ 19.50 per share. Michael D. Fraizer, former chairman, president and CEO of GE Financial Assurance, will become chairman, president and CEO of Genworth.

2008: Genworth reports losses of $ 572 million for the year as the collapse in the real estate market results in huge payouts in mortgage insurance while a decline in the stock markets hurt its investments and depressed the company’s share price. The company laid off around 1,000 employees.

May 2012: Michael D. Fraizer resigned as Chairman and CEO of Genworth. James S. Riepe named non-executive chairman.

December 2012: Longtime insurance industry manager Thomas J. McInerney has been named President and CEO of Genworth.

December 31 2013: Genworth stock closed at $ 15.53 after doubling for the year as the company’s US mortgage insurance business posted its first annual profit since 2007.

2013-2014: As the mortgage insurance business stabilized, Genworth suffered losses in the long-term care insurance business. The company reported a loss of $ 1.2 billion for 2014 after allocating hundreds of millions of dollars to cover the cost of long-term care insurance.

May 2014: Genworth raised $ 545 million by selling a stake in its Australian mortgage insurer.

March 2nd, 2015: Genworth reported a significant weakness in long-term care insurance accounting. The shares fell 5.4% to $ 7.33.

April 29, 2015: McInerney said he was open to taking Genworth private if a buyer were willing and able to take the risks.

February 4, 2016: Genworth stopped selling traditional life and annuity products after posting a loss in the fourth quarter.

October 2016: Genworth has agreed to be acquired by China Oceanwide Holdings Group Ltd., a privately owned, family-owned international financial holding based in Beijing, for $ 5.43 per share, or $ 2.7 billion.

March 2017: Genworth shareholders have approved the acquisition of the company by China Oceanwide.

2017-2020: The completion of the China Oceanwide contract has been delayed several times as Genworth sought the approval of numerous state insurance regulators and federal regulators.

June 2018: The United States’ Foreign Investment Committee (CFIUS) has approved the proposed deal with China Oceanwide. CFIUS is a joint committee of federal agencies that reviews acquisitions of US companies by foreign companies for national security concerns. As part of its approval efforts, Genworth agreed to use a US-based third-party provider to manage and protect its US policyholder data.

August 2019: After failing to get Canadian regulatory approval for the China Oceanwide deal, Genworth agreed to sell his Canadian mortgage insurance business to Brookfield Business Partners LP, a Toronto-based investment firm.

December 12, 2020: Genworth said China’s business management agency – the National Development and Reform Commission (NDRC) – re-approved the deal. Genworth and China Oceanwide are extending the deal for the 17th time to December 31st to give China Oceanwide more time to complete the financing.

January 4, 2021: Genworth said the merger has been suspended indefinitely, although both companies said they may still close a deal. Genworth said it was focused on pursuing a contingency plan that could include a partial IPO of stocks for its US mortgage insurance business.

April 6, 2021: Genworth said it exercised its right to terminate its merger agreement with China Oceanwide, which will allow the company to pursue its revised strategic plan without restrictions or uncertainty about its ultimate ownership.