Genworth Financial’s move to offload a 52 per cent interest in local mortgage insurer Genworth Mortgage Insurance Australia is understood to have been driven by a need for more funds following the collapse of a takeover plan by China Oceanwide Holdings.
Genworth agreed to accept China Oceanwide’s US$2.7bn acquisition proposal in 2016, but the deadline has lapsed without a transaction being completed and has not been extended after 16 extensions earlier.
The deal was supposed to give Genworth a much-needed $US1.5 billion capital infusion, and was originally agreed to at a time when Chinese conglomerates were flush with cash and paying top dollar for assets all over the world.
The company had also considered an initial public offering of stock of its US mortgage-insurance business.
However, the understanding is that a selldown of the stake in the $1.1bn Australian operation proved to be the best solution to secure cash at a time that Australian house prices increased at the fastest rate in 17 years in February.
It is understood that the sell down on Sunday through Goldman Sachs drew heavy demand from domestic institutional investors, with some new substantial shareholders to emerge from the trade.
Shares on Monday were trading at $2.42 before midday after they were sold at $2.28 as part of the trade, an 11.6 per cent discount to the last closing price of $2.58.
The sale allows Genworth Financial to reap $488.6m in proceeds.
With respect to the collapse of the China Oceanwide transaction, the Wall Street Journal reported that financing, which was to be partially supplied by Hony Capital, is understood to have been a stumbling block.
It passed numerous regulatory hurdles, getting approval from Chinese authorities, insurance regulators and the Committee on Foreign Investment in the U.S., which reviews cross-border deals for national-security concerns.
But also weighing on the prospects of a deal completing has been the COVID-19 pandemic, and Genworth Financial’s shares have fallen as a result, with its market value at about US$1.4bn at the start of this year.
Genworth Financial listed Genworth Mortgage Insurance Australia in 2014 with shares sold at $2.65 each.
It is the largest mortgage insurer in the market along with QBE.
The company this month posted a $107.6m full-year loss, which came with an increase in reserving to reflect an anticipated rise in claims linked to the global pandemic.
With the Wall Street Journal
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