Genworth Focusing On ‘Contingency Plan’ As Merger In Limbo

Genworth announced today it will focus on a “contingency plan” as another deadline for finalizing its merger with China Oceanwide Holdings Group came and went without an extension.

Given uncertainty around the completion and timing of the remaining steps required to close the transaction, Genworth and Oceanwide have not extended the current Dec. 31, 2020, "end date" under the merger agreement, Genworth said in a news release on its website. The deadline to complete the merger already has been extended 16 times. Such a merger was expected to infuse Genworth with $1.5 billion in capital.

However, the merger agreement remains in effect, although either party is able to terminate the merger agreement at any time, Genworth said.

One obstacle to merger has been the deal’s financing, which was to be partially supplied by Hony Capital, a Chinese private-equity firm, according to a Wall Street Journal report. Genworth said the Covid-19 pandemic “and associated restrictions” also delayed the deal’s closing.

Oceanwide said that it will continue to work toward closing the transaction, and Genworth remains open to completing the transaction if Oceanwide completes the remaining steps.

In the interim, Genworth is focusing on executing its contingency plan, including a potential partial initial public offering of Genworth's U.S. Mortgage Insurance business, designed to meet its near-term liabilities of approximately $1 billion of debt due in 2021.

Genworth said it has reduced holding company debt over time and built a solid position of approximately $1 billion in cash and liquid assets as of Dec. 31, 2020. Genworth added it intends to manage its U.S. life insurance companies on a standalone basis with no plans to infuse capital into those companies in the future, “absent an Oceanwide transaction.”

James Riepe, non-executive chairman of the Genworth board, said: "When we considered our most recent extensions of the merger agreement, Genworth's board of Ddrectors believed we were on a path to a near-term closing based on the information we were provided. Given the most recent update, we do not believe a closing can occur in the near term.

Thus, the management team will fully focus its efforts on executing our contingency plan. We appreciate the continuing patience of our shareholders, employees and other stakeholders as we continue to pursue steps that will maximize Genworth's value."

Tom McInerney, Genworth president and CEO, continued: "While we are disappointed that we could not close the transaction by the end of 2020, the parties retain the ability to ultimately complete the transaction if Oceanwide can secure the required funding and the parties can complete the remaining steps to closing, and if the transaction is still in the best interests of Genworth at that time. At the same time, we are moving forward with our contingency plan to meet our near-term obligations and maximize long-term value, which we believe is the best approach for our shareholders."