Genworth agrees to be sold to Chinese firm

Published November 30, 2016 by Veronica Garabelli

One of Virginia’s Fortune 500 companies is set to go private if a recently announced deal goes according to plan.

Henrico County-based Genworth Financial Inc. has agreed to be acquired by Beijing-based China Oceanwide for $2.7 billion, or $5.43 per share, in cash.

The deal — already approved by the companies’ board of directors — must also be endorsed by Genworth’s stockholders and regulators. 

Genworth expects the transaction to close by mid-2017. Nonetheless, some observers are skeptical that all the loose ends will be tied up by then.

“When you have a foreign buyer like this who doesn’t already have existing insurance operations in the U.S., it tends to take a little bit longer to get the regulatory approval across the board,” says Kenneth Billingsley, senior vice president and research analyst at Compass Point Research & Trading LLC in Washington, D.C.

One Genworth shareholder already is seeking to stop the deal.  According to  RichmondBizSense.com, Harold Faverman filed a lawsuit against Genworth in November seeking to  block the acquisition or win damages if it is completed.  “The proposed transaction was the result of a flawed process and is woefully inadequate in light of Genworth’s true value and its growth prospects,” the lawsuit states.

Tom McInerney, Genworth’s president and CEO, says the deal is in the best interests of Genworth’s stockholders because it creates “greater and more certain stockholder value than our current business plan or other strategic alternatives.”

Under the agreement, Genworth would become a subsidiary of China Oceanwide but continue to be based in Henrico. China Oceanwide has investments in financial services, energy, real estate and media. It was founded and is chaired by Lu Zhiqiang, whose net worth is more than $5 billion, according to Forbes.

Genworth is a major provider of mortgage and long-term care (LTC) insurance. During the past few years, Genworth has struggled because of losses in its LTC business.  In the third quarter of 2016, the company reported a net loss of $380 million, compared with a net loss of $284 million in the third quarter of 2015.    

As part of the transaction, China Oceanwide has agreed to provide Genworth with $600 million of cash to meet debt maturing in 2018 as well as $525 million in cash for Genworth’s U.S. life insurance businesses. China Oceanwide, however, says it has no plans to contribute money to support Genworth’s LTC business.