Study of GNW
Is it good to buy OTM LEAP on GNW? A small change of GNW will have drastic change in OTM LEAP
- 01/04/2021 – Not looking good for GNW in short term (no short term deal) and long term (nature of business). The only possible bright spot might be the partial IPO.
Merger of U.S. Insurer Genworth and China Oceanwide Fizzles
Deadline passes to complete $2.7 billion deal reached in 2016; Genworth’s shares tumble
China Oceanwide Holdings Group Co.’s four-year-old agreement to buy Genworth GNW -28.84% Financial Inc., one of the world’s longest deal engagements, is petering out.
Back in October 2016, Genworth agreed to sell itself to the private Chinese conglomerate for $2.7 billion in cash. But on Monday, Richmond, Va.-based insurer Genworth GNW -28.84% said a year-end 2020 deadline to complete the transaction with Beijing-based China Oceanwide wasn’t extended—after 16 previous extensions.
While the companies didn’t cancel the merger agreement, the move indicates the long-running affair could end without a marriage.
Genworth said one stumbling block has been the deal’s financing, which was to be partially supplied by Hony Capital, a Chinese private-equity firm. A Hony Capital representative declined to comment.
Genworth said the Covid-19 pandemic “and associated restrictions” also delayed the deal’s closing.
Given the many closing extensions, some regulators had to approve the deal a second time after their earlier approvals expired.
Hong Kong, a major hub for Chinese companies’ fundraising, in December tightened travel restrictions following a rise in coronavirus cases. Since late last month, it has imposed 21-day mandatory quarantines on arrivals from most countries, deterring many international travelers.
As Oceanwide and the U.S. insurer struggled to close the deal over the past year, Wall Street analysts said they believed Genworth has financial resources to run its operations without a buyer. The company has a robust mortgage-insurance business to generate revenue and profits, and it has enough money on hand to cover its 2021 debt obligations, analysts have said in recent months.
But the collapse of the deal would mean that Genworth’s days as a pioneer in long-time-care insurance are over. Genworth helped popularize the product line in the 1990s and 2000s, and it led the sales charts in many years.
The policies typically pay for in-home aides, nursing homes and other costs of people who no longer can care for themselves. Millions of Americans own policies, which were once sold by an array of prominent insurers.
The absence of a deal will shine a spotlight on longstanding concerns about the adequacy of many insurers’ reserves for paying long-term-care claims potentially over decades. According to a December report by Moody’s Investors Service, Genworth has about $30 billion in such reserves, making it home to the biggest single block of long-term-care policies in the U.S. life-insurance industry.
Genworth said Monday that it intends to manage its U.S. life insurance companies “on a stand-alone basis with no plans to infuse capital into those companies in the future, absent an Oceanwide transaction.”
The company also said it is focusing on executing a contingency plan that could include an initial public offering of stock of its U.S. mortgage-insurance business. Genworth said this and other steps would help improve its financial position, adding that it has enough cash and assets to pay off debt coming due next month.
- 01/04/2021 – the merger probably will not happen. Big drop if price! Will GNW do partial IPO?
Genworth shares slide 34% premarket as China Oceanwide deal faces further delay
Shares of insurer Genworth Financial Inc. GNW, -28.70% slid 34% in premarket trade Monday, after the company and China Oceanwide Holdings Group Co. Ltd provided an update on their merger agreement. “Given uncertainty around the completion and timing of the remaining steps required to close the transaction, Genworth and Oceanwide have not extended the current December 31, 2020 “end date” under the merger agreement,” the companies said in a joint statement. The delay since the two companies last agreed to extend the agreement on Nov. 30 is due to the COVID-19 pandemic and related restrictions as well as the need to finalize financing terms with Hony Capital, said Oceanwide. The merger agreement remains in effect, but either party can terminated it at any time. “Oceanwide has shared that it will continue to work towards closing the transaction, and Genworth remains open to completing the transaction if Oceanwide completes the remaining steps,” said the statement. In the meantime, Genworth is focused on executing its contingency plan, which includes a potential partial initial public offering of its U.S. mortgage insurance business, which seeks to meet near-term liabilities of about $1 billion o f debt that comes due in 2021. Genworth has already sold its Canadian mortgage insurance business for about $1.8 billion in December of 2019 and raised $750 million in debt at the U.S. MI holding company level in August of 2020. The company now has about $1 billion in cash and liquid assets as of Dec. 31, about $340 million of which is ringfenced to cover February 2021 senior notes at maturity. “When we considered our most recent extensions of the merger agreement, Genworth’s Board of Directors believed we were on a path to a near-term closing based on the information we were provided,” non-executive Chairman James Riepe said in a statement. “Given the most recent update, we do not believe a closing can occur in the near term.” Shares have fallen 13.5% in the last 12 months, while the S&P 500 SPX, -2.15% has gained 16%.
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- 11/30/2020 – NDRC re-approval, and one month extension for final completion
Genworth rallies on NDRC re-approval of Oceanwide transaction
- Genworth Financial (NYSE:GNW) +11.3% PM, and China Oceanwide Holdings received confirmation of the extension of the acceptance of filing from the National Development and Reform Commission (NDRC) in China.
- Oceanwide will now move forward with remaining regulatory steps required to close the transaction.
- Both the parties are working on an extension of the waiver and agreement of each party’s right to terminate their previously announced merger agreement until not later than Dec. 31, 2020.
- Also, they plan a 90-day extension of each of the three $500M tranches under the post-close Oceanwide capital plan.
Genworth and Oceanwide Announce NDRC Re-Approval of Transaction
To allow additional time for Oceanwide to complete these final steps, the parties are working on an extension of the waiver and agreement of each party’s right to terminate their previously announced merger agreement until not later than Dec. 31, 2020. The parties are also working on a 90-day extension of each of the three $500 million tranches under the post-close Oceanwide capital plan.
“We are encouraged that Oceanwide continues to make progress on the remaining steps needed to complete the transaction,” said Tom McInerney, Genworth president and CEO. “Although I am disappointed we could not close by November 30, we are hopeful that we can close in the first half of December, but have agreed to an end date of December 31, 2020 to allow more time for the remaining regulatory approvals to be achieved.”
“Securing these last few remaining regulatory approvals and finalizing our financing are important milestones in our efforts to close our transaction and fulfill our vision of bringing long term care insurance to China,” said LU Zhiqiang, chairman of Oceanwide. “We look forward to working with Genworth to complete the remaining steps required to close the transaction in December.”
The transaction previously received all U.S. regulatory approvals needed to close the transaction, subject to confirmation from the Delaware Department of Insurance that the acquisition of Genworth’s Delaware-domiciled insurer may proceed under the existing approval. With respect to other recent regulatory matters: FINRA has confirmed that the transaction may close under FINRA Rule 1017(c) prior to receiving its final approval; the GSEs have re-approved the transaction, subject to certain conditions, and the parties will seek their non-objection to the adjusted capital contributions schedule; and the North Carolina Department of Insurance extended its previously-granted approval through January 24, 2021. Oceanwide now needs to receive clearance for currency conversion and transfer of funds from SAFE. All other required approvals and clearances have been secured.
- 11/29/2020 – Are you near the final deal completion?
Genworth/Oceanwide deal’s final conditions may be near completion
Genworth (NYSE:GNW) and Oceanwide, a long-running transaction which has been the subject of much speculation, may be nearing completion.
According to various screenshots circulated on Twitter, the China’s NDRC may have granted regulatory approval for China Oceanwide to move forward in its $2.7 billion transaction for the U.S.-based insurance company, valued at $5.43/share. The NDRC’s approval was one of the last conditions required before the deal could be completed, according to the company’s latest update. SAFE approval was also needed.
Genworth’s shares have been subject to heavy volatility surrounding the deal, surging as recently as this month when Oceanwide provided documents surrounding its financing for the deal.
Delays surrounding the deal sent shares of GNW down more than 10% earlier this year.
In early November, in an update on the deal, the Chairman of Oceanwide said, “the Oceanwide team and I have made significant progress towards satisfying the necessary requirements to close the transaction by November 30.”
The deal was originally struck in 2016 and extended about 15 times.
Seeking Alpha contributor Glen Bradford opined on the odds of the deal earlier this month, at the time valuing the recent transparency at $4.75-5.25 per share. Shares closed at $4.15/share on Friday.
- 11/11/2020 – a play on special situation with imminent catalyst?
Genworth Financial: $5.43 Per Share Buyout Could Close Before End Of November
- China Oceanwide and Genworth continue to make progress towards closing this deal for $5.43 by the end of November.
- The ~20% price discrepancy between the current price and closing price leaves roughly 1% per day of upside, assuming the deal closes.
- I expect more Deal Reporter updates in the near future on financing updates and other steps taken as this deal moves to close.
The question I ask myself is, what requires an 8-K press release these days?
- Final agreement between Hony and China Oceanwide
- NDRC Re-approval
- Delaware confirmation
- SAFE approval
Somewhere in there, I would think there has to be some sort of news flow from Deal Reporter or an 8-K put out informing investors that the deal has made significant progress. Lastly, I would think China Oceanwide may start to feel that it does not have much time to close this deal at $5.43; because with Genworth’s business improving on all fronts and blowout earnings, shareholders can be expected to pressure the company to ask for a better deal at the annual meeting if the deal is not closed by then. The current extension runs out at the end of this month, and I expect to hear major constructive news either in pieces or all at once before that as part of the closing process – at which point, the close date will probably be moved forward to some agreed upon-date before the end of the month.
- 11/02/2020 – one step closer for the deal
Genworth rises 5.3% after Oceanwide provides documents for $1.8B financing
Genworth and Oceanwide Provide Transaction Update
RICHMOND, Va., Nov. 2, 2020 /PRNewswire/ — Genworth Financial, Inc. (NYSE: GNW) and China Oceanwide Holdings Group Co. Ltd (Oceanwide) today provided an update on the status of their pending transaction.
Genworth announced that Oceanwide has made significant progress on the Hony Capital funding and has provided satisfactory documentation to Genworth indicating that Hony Capital expects to be able to finalize the $1.8 billion financing in November, and that Oceanwide is continuing to work diligently with the goal of closing the transaction by November 30, 2020, subject to timely receipt of outstanding regulatory re-approvals, confirmations and/or clearances. Oceanwide is also gathering funds in Mainland China to provide the remaining amount required to pay for the total Genworth purchase price of $5.43 per share. In addition, Oceanwide has requested confirmation of the extension of the acceptance of filing from the Chinese National Development and Reform Commission (NDRC) with respect to the transaction.
“The Oceanwide team and I have made significant progress towards satisfying the necessary requirements to close the transaction by November 30,” said LU Zhiqiang, chairman of Oceanwide. “We look forward to combining Oceanwide’s financial services capabilities with Genworth’s long term care insurance expertise to develop new insurance businesses in China and the rest of Asia, which remains a key part of our future business strategy.”
James Riepe, non-executive chairman of the Genworth Board, said, “The Directors are pleased with the progress on funding that the Oceanwide team has made to date, especially considering the public health challenges they face. In light of this progress, the Board has determined not to exercise its right to terminate the merger agreement at this time. We will remain in regular contact with Oceanwide and the Genworth management team as they work to complete the remaining steps to close this transaction.”
Added Tom McInerney, president and CEO of Genworth, “Based on our discussions with Oceanwide and additional documentation regarding the funding processes provided to Genworth, we are hopeful that Oceanwide’s transaction funding will be completed in time to close the transaction by November 30, 2020 without the need for an additional extension. We are very impressed with the efforts and progress achieved by Chairman Lu and his team regarding the financing requirements and the filing updates provided to the appropriate Chinese regulators.”
The transaction has now received all U.S. regulatory approvals needed to close the transaction, subject to confirmation from the Delaware Department of Insurance that the acquisition of Genworth’s Delaware-domiciled insurer may proceed under the existing approval. With respect to recent regulatory matters: FINRA has confirmed that the transaction may close under FINRA Rule 1017(c) prior to receiving its final approval; the GSEs recently re-approved the transaction, subject to certain conditions; and the North Carolina Department of Insurance extended its previously-granted approval through January 24, 2021. Oceanwide needs to receive clearance for currency conversion and transfer of funds from SAFE, and the NDRC needs to confirm the extension of the acceptance of filing with respect to the transaction, as its prior acceptance of filing has expired. All other required approvals and clearances have been secured.
- 10/24/2016 – background knowledge: a long over due deal since 2016
Things to Know About China Oceanwide
Little-known Chinese conglomerate China Oceanwide Holdings Group Co., just struck a deal to acquire Genworth Financial Inc., a big player in the U.S. long-term-care insurance industry, for $2.7 billion. It is the company’s first major foray into the insurance sector overseas. Here are five things to know about Oceanwide.
