China Oceanwide Holdings Group Co (中泛控股集團) has agreed to buy US insurer Genworth Financial Inc for US$2.7 billion in cash, the latest in a series of moves by Chinese firms to buy overseas assets as their domestic economy slows and the yuan weakens.
In a joint statement on Sunday, Genworth and privately held and family-owned China Oceanwide said the Chinese firm is to pay US$5.43 per share to acquire all of the Richmond, Virginia-based firm’s outstanding shares.
The price is a modest 4.2 percent premium over Genworth’s closing price on Friday last week.
However, the Beijing-based holding firm — little known, but founded by well-connected Chinese businessman Lu Zhiqiang (盧志強) — agreed to commit another US$1.12 billion toward Genworth debt maturing in 2018 and life insurance claims charges, the statement said.
Both companies’ boards backed the deal, which remains subject to regulatory approvals and likely will not close before the middle of next year.
The purchase comes amid a hectic year for Chinese buyers chasing overseas assets. So far, this year has seen Chinese firms launch a record US$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 (復星國際) and unlisted Anbang Insurance Group Co (安邦保險集團) 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. However, rarely has an insurance deal by a Chinese acquirer been blocked outright by international watchdogs, according to people familiar with these transactions.
In some cases, Chinese buyers have also been paying top dollar to secure insurance assets.
Thaihot Group Co Ltd (泰禾集團) paid nearly three times Dah Sing Financial Holdings Ltd’s (大新金融集團) embedded value last year in a recent US$1.4 billion purchase. That was more than double the valuation at which a previous Hong Kong insurance deal was done.
Beijing-based China Oceanwide — described by Genworth president and CEO Tom McInerney as “an ideal owner” going forward — is also the controlling shareholder of Hong Kong-listed China Oceanwide Holdings Ltd (中泛控股有限公司), worth about US$1.6 billion by market value.
McInerney said the capital commitment from China Oceanwide Holdings Group would strengthen Genworth’s business, increasing the likelihood of obtaining regulatory approval.
The parent group’s operations span financial services, energy, culture, media and real-estate assets globally, employing more than 10,000 employees worldwide.
Genworth, which traces its roots back to 1871 and went public in 2004, has mortgage insurance operations in the US, Canada and Australia, as well as the US life insurance business.
Shares in Genworth’s Australia unit, Genworth Mortgage Insurance Australia Ltd, yesterday rose 1.9 percent on the news.
Goldman Sachs Group Inc and Lazard Ltd are acting as financial advisors to Genworth. Citigroup Inc and Willis Capital Markets & Advisory are acting as financial advisors to China Oceanwide Holdings Group, the statement said.
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