Mortgage insurer Genworth Financial has announced a further delay to its planned merger agreement with China Oceanwide Holdings Group Co., Ltd., now setting the deadline at no later than September 30, 2020.
Originally set for June 30, 2019, Genworth first delayed the merger to allow time to explore the sale of its Canadian business.
A later deadline set for March 2020 was then further pushed back due to operational disruptions caused by COVID-19.
Given the further delay to the transaction, Genworth is taking steps to address its near-term liabilities, which include liabilities arising under the pending AXA litigation and approximately $1 billion in debt maturing in 2021.
Genworth expects these steps to include a debt offering in the near term and taking the necessary steps to launch a 19.9% IPO of its US mortgage insurance business, in the event the China Oceanwide transaction is terminated.
The extension also gives Oceanwide additional time to finalize the financing for the transaction purchase price of $5.43 per share, which may include debt funding of up to $1.8 billion through Hony Capital and/or other third parties.
Genworth and China Oceanwide also agreed to additional conditions, including that $1 billion is made available to Oceanwide from sources in Mainland China to fund the acquisition of Genworth.
Furthermore, Hony Capital and/or other acceptable third-parties have committed to provide Oceanwide $1. billion or more from sources outside of China to fund the transaction.
If the conditions are not met, Genworth has the right to terminate the merger agreement as of August 31.
“We heard from our stakeholders that they would like greater assurance that the Oceanwide transaction is making progress towards closing,” said Tom McInerney, President and CEO of Genworth.
“This extension and associated milestones address stakeholders’ concerns and provide our Board with the flexibility to execute on our strategic priorities and maximize shareholder value while we continue to work with Oceanwide to close the transaction,” McInerney continued. “We continue to believe the transaction represents the best and most certain value for Genworth’s shareholders.”
LU Zhiqiang, Chairman of Oceanwide, also commented: “We have overcome many hurdles during the past three and half years and continue to persevere because of the future value of Genworth to our vision of pursuing the significant opportunities for long term care (LTC) insurance in the U.S., China and the rest of Asia. We remain committed to securing financing for the transaction in order to close the transaction as soon as possible.”