Data Privacy A Key Issue In Genworth Deal

CONSUMER INFO

The protection and privacy of U.S. citizens' personal information is one of the main issues holding up Henrico County-based Genworth Financial Inc.'s proposed acquisition by a China-based company.

The insurance company, which has thousands of employees in Virginia, is working on a "mitigation approach" aimed at protecting personal data and resolving concerns by federal regulators, Thomas McInerney, Genworth's president and chief executive officer, told shareholders at its annual meeting Wednesday.

He said both companies remain committed to completing the $2.7 billion deal that was announced more than a year ago.

Genworth is negotiating an agreement that would keep data such as financial and health information of its policyholders under the control of a U.S.-based data administrator.

"The additional mitigation approach is designed to protect U.S. citizens' private, personal information by using the data administration services of a leading U.S. third-party service provider," McInerney said.

In March, Genworth shareholders overwhelmingly approved the acquisition by China Oceanwide Holdings Group Co., a privately held financial company based in Beijing.

The companies first announced the deal in October 2016, but they have twice postponed the deadline for completing it - most recently until April 1 - because of regulatory reviews. The original deadline to complete the deal was Aug. 31.

Genworth, now a Fortune 500 company, would become a private company as a subsidiary of China Oceanwide. The company has said it would keep its Henrico headquarters.

Insurance regulators in states where Genworth has operations, including in Virginia, have approved the acquisition, but the company remains in discussions with state regulators in Delaware.

A review also is ongoing by the Committee on Foreign Investment in the United States, a joint committee of federal agencies that scrutinizes transactions resulting in control of U.S. businesses by foreign entities.

Several shareholders at the meeting, which was held at the Westin hotel in Henrico, questioned Genworth management about the reasons for the delay.

McInerney said the regulatory review was slowed partly because the transition to the Trump administration left some leadership positions vacant at federal agencies that are part of the review by the Committee on Foreign Investment in the United States.

"Second, I think there has been significantly more scrutiny of foreign deals, particularly with China," McInerney said.

The Genworth-Oceanwide deal is one of 27 U.S. acquisitions by Chinese companies this year that have faced delays under federal regulatory review, he said.

The proposed acquisition values Genworth stock at $5.43 per share. It also would include a $1.1 billion cash infusion to strengthen the company's financial position, which has been weakened by larger-than-expected costs in its long-term care insurance business that provides coverage for nursing home or at-home care.

Genworth stock closed at $3.41 a share Wednesday.

One shareholder suggested that stockholders would get more value if the company abandoned the acquisition and sold its mortgage insurance businesses in the United States, Canada and Australia.

McInerney said the company's management and board of directors believe the acquisition remains the best option to maximize value for stockholders.

Genworth's non-executive board chairman, James S. Riepe, thanked shareholders for their patience.

"It's been a long year, and we know that our stockholders and management expected to be further along," he said. "We understand that the delays experienced with respect to the transaction have been frustrating, and I can only tell you that we all share your frustration."

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