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Business, Policy

China’s Oceanwide and Genworth Extend $2.7B Merger Deal Deadline To Next April

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In a sign of increasing scrutiny on Chinese acquisitions in the U.S., a Chinese buyer said it is refiling its applications to a U.S. foreign deal oversight body in order to add mitigation measures to secure U.S. government approval.

Beijing-based financial holding company China Oceanwide Holdings Group has, for the second time, extended the deadline of closing the US$2.7 billion acquisition of U.S. mortgage and long-term care insurance firm Genworth Financial Inc. The deadline was moved to next April, allowing additional time for regulatory reviews of the transaction, which was agreed to last October, according to a company announcement.

“We expect to refile our joint voluntary notice with the Committee on Foreign Investment in the United Stated (CFIUS) in the near term,” said Tom McInerney, president and CEO of Genworth, in the announcement. Genworth and Oceanwide withdrew their most recent joint voluntary notice to CFIUS with the intent to refile with additional mitigation approaches, including potentially working with a U.S. third-party service provider.

This is one of a series of drawbacks suffered by Chinese buyers in the U.S. during the past few month, following President Trump blocked Chinese state-backed Canyon Bridge Capital Partners’ planned US$1.3 billion acquisition of Lattice Semiconductor Corp. Another Chinese investor, SDIC Fund Management Co., Ltd., abandoned a US$47 million strategic equity investment two months ago in U.S. energy storage company Maxwell Technologies, due to failure to gain approval from the Committee on Foreign Investment in the United States.

U.S. lawmakers unveiled a proposed new set of proposed laws last month, aiming to limit Chinese investments in American companies, especially in critical high tech sectors such as artificial intelligence, robotics and aerospace.

In October last year, Oceanwide, founded by Chinese billionaire Lu Zhiqiang, agreed to acquire Genworth for US$2.7 billion, paying the insurance firm US$5.43 per share in cash. In addition, Oceanwide will contribute US$600 million in cash to address Genworth’s debt maturing in 2018.

Later in July this year, the duo extended the deal’s deadline of August 31 to end of November, to pass scrutiny by various U.S. and foreign government regulatory agencies, including CFIUS.

The two companies said they are committed to continuing to work on robust mitigation proposals, but there can be no assurances that CFIUS will ultimately agree to clear a transaction between Genworth and Oceanwide on terms acceptable to the parties or at all.

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