Genworth axes $ 2.7 billion merger deal with China-based company

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More than four years after its first announcement, Genworth Financial Inc.’s plan to sell itself to a China-based investment firm is officially dead.

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

The deal was later stalled after years of government regulatory reviews in the United States and Canada, forcing Genworth and China Oceanwide to delay completion of the merger 17 times.

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

However, China Oceanwide was unable to come up with a financing plan to complete the acquisition late last year. Companies blamed this in part on the disruption caused by the coronavirus pandemic.

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

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

When the acquisition was suspended indefinitely in January, Genworth said it would pursue other strategic options to help the company pay off about $ 1 billion in debt it owed this year. This revised strategic plan includes a possible partial public offering of its shares for its mortgage insurance business in the United States.

China Oceanwide and Genworth will also continue to explore potential opportunities to offer long-term care insurance and other similar products in the Chinese insurance market in the future.

Tom McInerney, president and chief executive officer of Genworth, said on Tuesday that it was “necessary and appropriate at this point to end the transaction,” but raised the possibility that Genworth could still work with China Oceanwide to find a new long-term market. health insurance in China.

“Both sides believe that there are significant and compelling opportunities to meet critical societal needs outside the United States,” he said.

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

Genworth has faced many business challenges over the past decade, initially struggling to recover from the real estate slump and Great Recession of 2007-2009 which plagued its mortgage insurance business. housing that covers defaults on home loans.

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

With the company’s stock still being much lower in value than it was before the economic recession over 10 years ago, Genworth executives and board members have long defended the planned China Oceanwide acquisition as the “best option” for delivering value to the company’s shareholders and potentially opening up a new market for its insurance products in China.

Genworth shares rose 3 cents, or 0.86%, to close at $ 3.51. News of the termination was released after the market closed.

“The Genworth Board of Directors has concluded that Oceanwide will not be able to complete the proposed transaction within a reasonable time frame and that greater clarity on Genworth’s future is now needed for the company to execute its plans aimed at maximizing shareholder value, “James Riepe, the non-executive chairman of the board of directors of Genworth, said in a statement Tuesday.

“So the board has decided to end the Oceanwide merger agreement,” Riepe said. “Although disappointed after more than four years of effort, I would like to especially thank our shareholders, regulators, policyholders, customers and employees, for their patience and support as all of us have persevered through a cross-border approval process. particularly long and arduous. “

Riepe is one of three directors of Genworth who have announced their intention to step down from the company’s board after its annual meeting of shareholders scheduled for May 20. Genworth has announced three new board members.

The failed acquisition has already led to job cuts at Genworth. At the end of January, the company revealed that it was laying off 95 employees from its head office in Henrico.

Chronology

1871: The Life Insurance Company of Virginia, known as Life of Virginia, was founded by two dozen investors in Petersburg and offered its first policies to local clients. The company then expanded and moved its head office to Richmond.

1927: The company has expanded its portfolio to include annuities.

1961: The company has added mortgage insurance to its insurance offerings.

1967: Richmond Corp. was established to serve as a holding company for Life of Virginia and Lawyers Title Insurance Corp.

1974: The company started offering long term care insurance policies.

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

1984: Richmond-based Universal Leaf Tobacco Co. Inc. acquired Lawyers Title from Continental Financial Services for $ 115 million. Universal Corp. established 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 next year.

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

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

October 2003: Genworth Financial was created by the amalgamation 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 $ 19.50 per share. Michael D. Fraizer, former president, president and chief executive officer of GE Financial Assurance, becomes president, president and chief executive officer of Genworth.

2008: Genworth reports $ 572 million in losses for the year as collapse in the real estate market forces it to make huge payments in its mortgage insurance business, while a decline in the stock market hurt its investments , lowering the company’s stock price. The company laid off around 1,000 employees.

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

December 2012: Long-time insurance industry leader Thomas J. McInerney is appointed President and CEO of Genworth.

December 31, 2013: Genworth stock closed at $ 15.53 after doubling for the year, with the company’s U.S. mortgage insurance business posting its first annual profit since 2007.

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

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

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

April 29, 2015: McInerney said he would be open to privatizing Genworth if a buyer was willing and able to accept the risks.

February 4, 2016: Genworth suspended sales of traditional life insurance and fixed 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 Beijing-based private and family-owned international financial holding company, for $ 5.43 per share or $ 2.7 billion.

March 2017: Genworth shareholders voted in favor of China Oceanwide’s acquisition of the company.

2017-2020: Completion of the China Oceanwide deal has been repeatedly delayed as Genworth has sought approval from numerous state insurance regulators and federal regulators.

June 2018: The Committee on Foreign Investments in the United States, or CFIUS, has approved the proposed deal with China Oceanwide. The CFIUS is a joint committee of federal government agencies that reviews acquisitions of U.S. companies by foreign entities for national security reasons. As part of its efforts to gain approval, Genworth has agreed to use a US-based third-party service provider to manage and protect the data of its US policyholders.

August 2019: After being unable to secure approval from Canadian regulators for the China Oceanwide deal, Genworth agreed to sell its Canadian mortgage insurance business to Brookfield Business Partners LP, a Toronto-based investment firm.

December 12, 2020: Genworth said China’s economic management agency – the National Development and Reform Commission, or NDRC – had re-approved the deal. Genworth and China Oceanwide are extending the deal deadline for a 17th time until December 31 to give China Oceanwide more time to complete the financing.

January 4, 2021: Genworth said the merger has been on indefinite suspension, although the two companies have said they may still be in a position to strike a deal. Genworth said it was focused on pursuing a contingency plan that could include a partial initial public offering of shares for its mortgage insurance business in the United States.

April 6, 2021: Genworth said it exercised its right to terminate its merger agreement with China Oceanwide, allowing the company to continue with its revised strategic plan without restrictions and without uncertainty as to its ultimate ownership.

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