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Oct 24, 2016

From DealBook | NYT: China Worldwide Dips Into American Insurance - October 24, 2016.

nytimes.com

 


Amie Tsang
Lu Zhiqiang, the chairman of China Oceanwide. The company has interests in real estate and finance. Imaginechina, via Associated Press
HONG KONG — A Chinese conglomerate has agreed to buy the insurer Genworth Financial of Virginia for $2.7 billion, in the latest example of Asian firms buying American insurance companies.
The conglomerate, China Oceanwide, which has interests in real estate and finance, said on Sunday that it had struck a deal to buy Genworth for $5.43 per share, offering a 4 percent premium to shareholders compared with Friday’s closing. It also said that it would contribute an additional $1.1 billion to cover maturing debt and to invest in Genworth’s life insurance business.
Genworth, which provides mortgage and long-term-care insurance, would become a stand-alone subsidiary of Oceanwide.
Genworth also announced on Sunday that it would have an after-tax charge of $260 million to $300 million in the third quarter after reviewing how much it would have to keep in reserve for long-term-care claims.
The deal is part of a wave of interest from Japanese and Chinese companies looking to make acquisitions abroad. Japanese insurance companies have been making purchases overseas as a way to protect themselves as Japan’s population ages. Chinese companies have been buying foreign outfits as economic growth slows domestically. Major deals this year include China National Chemical’s $43 billion offer to acquire Syngenta of Switzerland, a maker of farm chemicals and seeds, and the Chinese insurer Anbang’s deal to buy a portfolio of high-end hotels from the Blackstone Group, an agreement valued at $6.5 billion.
“Genworth is an established leader in both mortgage insurance and long-term-care insurance, which are markets that present significant long-term growth opportunities,” said Lu Zhiqiang, Oceanwide’s chairman, in a news release.
For Chinese buyers, insurance in the United States isn’t always an easy deal to strike. Companies in the field need to clear regulatory hurdles at the state level in addition to the national level. Anbang, which also bought the Waldorf Astoria as part of its spending spree, withdrew its application with the New York State Department of Financial Services to buy Fidelity & Guaranty Life, an insurer based in Iowa, because regulators had asked about ties between shareholders.
Oceanwide, which has made investments in United States real estate through its subsidiaries recently, has to obtain regulatory approval for the deal in the states where Genworth does business. Mr. Lu and Thomas J. McInerney, the chief executive and president of Genworth, said that the capital commitment would increase the likelihood of obtaining regulatory approval.
Oceanwide has also invested in other sectors such as financial services and energy, with a controlling stake in Asia-Pacific Property & Casualty Insurance.
Through its Hong Kong-listed subsidiary, Oceanwide has spent hundreds of millions on real estate in New York, Hawaii and Los Angeles and invested in power plants in Indonesia. It spent $390 million on properties in Manhattan in August 2015 that it said it planned to turn into a commercial and residential tower. When it announced the purchase, the company said it wanted to expand its real estate business and build an international conglomerate.
If the Oceanwide-Genworth deal is approved by shareholders and regulators, the companies expect it to close by the middle of 2017.