Mortgage insurer Genworth Financial has announced a five-month extension to its planned merger agreement with China Oceanwide Holdings Group Co., Ltd., which will give it time to explore the sale of its Canadian business, Genworth MI Canada Inc.
Oceanwide, which had been set to acquire Genworth by June 30, 2019, gave its consent for Genworth to solicit interest in a potential disposition of the business, with a new merger deadline set for November 30.
The parties have decided to consider strategic alternatives for MI Canada due to a lack of progress in discussion on the transaction with Canadian regulators.
A potential disposition may be the best option given the absence of “any substantive guidance or likely timeframe for the completion of their review,” the companies said.
Once Genworth identifies a suitable transaction for MI Canada, Oceanwide will have the right to accept or reject the terms of the MI Canada transaction.
If accepted, the parties will seek to close the sale of MI Canada as promptly as possible, and the acquisition of Genworth Financial promptly thereafter.
However, if Oceanwide rejects the transaction, both parties will have the right to terminate their planned merger agreement.
“MI Canada is one of our top-performing businesses,” said Tom McInerney, President and CEO of Genworth. “However, the lack of transparent feedback or guidance from Canadian regulators about their review left us no choice but to look at strategic alternatives for MI Canada that would eliminate the need for Canadian regulatory approval of the Oceanwide transaction.”
“Another potential benefit of selling all or a portion of MI Canada would be the opportunity to use the proceeds to satisfy future debt maturities,” McInerney explained.
“The transaction with Oceanwide has taken longer than any of us anticipated and we owe it to our stockholders to close it as soon as possible,” he added. “However, an additional extension may be required to complete the potential disposition of MI Canada.”
“In the meantime, we are in discussions with other regulators about the disposition of MI Canada and its impact on the overall Oceanwide transaction.”
LU Zhiqiang, Chairman of Oceanwide, also commented: “Oceanwide remains committed to the transaction at the original purchase price of $5.43 per share. We also remain committed to the $1.5 billion contribution to Genworth, following the consummation of the transaction.
“We look forward to closing the transaction as soon as possible so that we can bring certainty to Genworth stockholders and begin to realize the benefits of our merger.”