As the stalemate continues, Genworth’s mortgage insurance (MI) spinoff is becoming more likely.
Genworth Financial had entered into a definitive agreement with China-based Oceanwide back in 2016, wherein Oceanwide had proposed to acquire the Richmond, Va.-based financial services provider for $2.7 billion in cash. This, however, hit a wall when the Chinese government stepped in and stalled the approval process.
Since then, Genworth Financial and Oceanwide have been attempting to restore the deal but have been unsuccessful, most recently due to Oceanwide facing financial difficulties. The most recent milestone in this saga was when the two companies had announced a revised agreement in June of 2019. However, this news failed to provide any assurance that the deal would eventually go through.
Forged from the uncertainty surrounding the deal, there rose the prospect of Genworth’s MI spinoff. To that end, the company began to take steps toward creating a structure for the spinoff and potentially selling its U.S. MI business, too. In November of 2019, the company had also hired JP Morgan Chase & Co. to be its financial adviser for exploring the spinoff’s feasibility.
Now, however, with the Oceanwide deal stalling yet again, it appears increasingly likely that the MI spinoff will come into fruition. This is especially true since the coronavirus pandemic has further strained the Chinese economy. Whether or not Oceanwide will ever be able to make a successful bid for Genworth Financial is looking less and less likely.
The proposed deal between Genworth Financial and China-based Oceanwide has been stalled for the past three years, resulting in the increasing likelihood of Genworth's mortgage insurance (MI) spinoff. The two companies had initially agreed to the $2.7 billion deal in 2016, but it remained in limbo due to China's intervention. The companies had agreed to a revised agreement last year, however, this too was unable to provide a stable path forward and the deal has again been postponed due to Oceanwide's financial issues. Furthermore, the outbreak of the coronavirus pandemic has further complicated the situation, making the MI spinoff more likely. As a result, Genworth has begun to take steps towards establishing a structure for the spinoff and possibly selling its U.S. MI business. Despite the initial attempts to merge the companies, it seems increasingly unlikely that the deal will be able to go through, and the spinoff appears to be the only viable option for the future.
This article was contributed on Oct 21, 2023