Genworth Financial said Monday that its long-delayed acquisition by China Oceanwide Holdings is on track to close by Sept. 30, after the Beijing-based company showed “satisfactory information” that it could raise enough money to fund the $2.7 billion deal.
The Virginia-based insurance company said it would not exercise its right to terminate the merger agreement after China Oceanwide showed that it could finance the purchase, which has been postponed since October 2016.
In June, Genworth Financial and China Oceanwide said that they were extending the deadline for closing the deal for the 15th time. The extension gave Genworth Financial the right to terminate the deal at the end of August if China Oceanwide could not show evidence that it could obtain at least $2 billion from sources inside and outside of China.
The takeover by the Chinese company, which has global holdings that include real estate investments in New York, California and Hawaii, is expected to give a much-needed financial boost to the insurance company.
“We are pleased with the progress Oceanwide has made toward securing the financing necessary to fund the transaction, which we continue to believe represents the best value for Genworth’s shareholders,” Tom McInerney, president and CEO of Genworth Financial, said.
“The August 31 milestone was important to both inform Genworth’s ongoing review process as well as provide an important update to our shareholders ahead of the September 30, 2020 deadline, particularly in light of the market disruptions driven by the global pandemic,” McInerney said.
James Riepe, non-executive chairman of the Genworth Financial board, said that he and McInerney have been in regular discussions with China Oceanwide about the deal funding efforts.
“Based on these discussions and the information provided by Oceanwide, we believe the funding is progressing well and that Oceanwide is working to close the transaction by September 30, 2020,” Riepe said.
The transaction has received all U.S. regulatory approvals needed in order to close, Genworth Financial said. However, China Oceanwide needs to get permission from Chinese regulators to convert the currency and transfer the funds needed to close on the deal.
“We believe there is significant future value in bringing long term care (LTC) insurance expertise to China and the rest of Asia, and thus remain committed to the transaction,” Lu Zhiqiang, chairman of China Oceanwide, said.
“We are pleased that, despite the constraints imposed by the global pandemic, we have been making very good progress to finalize the financing plan so that we can meet the September 30, 2020 closing date,” Lu added.
In July, Genworth Financial said it replaced its chief financial officer with Dan Sheehan, the insurer’s previous chief investment officer, as it continued to make progress in being acquired by China Oceanwide.
Genworth Financial said in June that the 15th extension would give the company time to address its approximately $1 billion in debt maturing in 2021 and its liabilities under a lawsuit brought against the company by French insurer AXA over payment protection insurance mis-selling claims. The company said in June that it reached an agreement with AXA to settle the dispute, agreeing to pay the French insurer an additional GBP 100 million ($125 million), on top of an interim cash payment made in the beginning of the year. Genworth Financial also agreed to issue a secured promissory note to AXA.