In new China Inc M&A push, Oceanwide strikes $3.8 billion deal for ex-GE insurer Genworth

Mon Oct 24, 2016 5:06am EDT
 
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By Denny Thomas and Julie Zhu

HONG KONG (Reuters) - Little-known China Oceanwide Holdings Group Co pledged $3.8 billion in a deal to take control of U.S. insurer Genworth Financial Inc GNW.N, the latest marker of Chinese firms accelerating a drive overseas while their domestic economy slows and the yuan weakens.

Founded by low-profile but well-connected billionaire Lu Zhiqiang, the Beijing-based investment firm agreed to pay $2.7 billion in cash to buy all Genworth shares, the firms said in a statement on Sunday. The price offers a modest 4.2 percent premium to Genworth's Friday closing price.

Oceanwide also committed another $1.12 billion to cover Genworth debt maturing in 2018, as well as life insurance claims charges faced by the firm spun out of General Electric (GE.N: Quote) in 2004. Genworth has seen its share price fall nearly two-thirds in the last 24 months while battling low interest rates and trying to stabilize its troubled long-term health insurance arm.

Both firms' boards backed the deal, reached after two years' "extensive review" by Genworth's board. But the transaction remains subject to regulatory approvals, and likely won't close before mid-2017, they said, without disclosing the exact source of the deal's funding.

The striking of a near-$4 billion deal by an unlisted Chinese firm that few outside the country know highlights how determined mainland buyers have become in a hectic year for chasing overseas assets. So far, 2016 has seen Chinese firms launch a record $181 billion of overseas mergers and acquisitions - about 70 percent more than the whole of last year.

Chinese investment holding firms have joined insurers like Fosun International Ltd (0656.HK: Quote) and unlisted Anbang Insurance Group in leveraging accumulated capital to buy global assets. Some recent purchases have also come from Chinese property companies, keen to reduce reliance on their home market.

Some recent Chinese bids have attracted intense regulatory scrutiny overseas. But rarely has an insurance deal by a Chinese acquirer been blocked outright by international watchdogs, according to people familiar with these transactions.

  Continued...

 
George Twopointoh, brand ambassador for Genworth, speaks with Ugo Dumont, a volunteer for the Genworth R70i Aging Experience, during a demonstration at the Liberty Science Center in Jersey City, New Jersey in this file photo dated April 5, 2016.   REUTERS/Shannon Stapleton