Benzinga | Jan 4, 2021 07:06AM EST

UPDATE: Genworth Says 'the merger agreement remains in effect, although either party is able to terminate the merger agreement at any time.'

RICHMOND, Va., Jan. 4, 2021 /PRNewswire/ -- Genworth Financial, Inc. (NYSE:GNW) (Genworth, the Company) and China Oceanwide Holdings Group Co., Ltd. (Oceanwide) today provided an update on their pending transaction.

Given uncertainty around the completion and timing of the remaining steps required to close the transaction, Genworth and Oceanwide have not extended the current December 31, 2020 "end date" under the merger agreement. Oceanwide has indicated that the factors contributing to the delay since the parties agreed to their most recent extension of the merger agreement on November 30, 2020 were: (a) the finalization of the Hony Capital financing terms; and (b) the COVID-19 pandemic and associated restrictions. However, the merger agreement remains in effect, although either party is able to terminate the merger agreement at any time. Oceanwide has shared that it will continue to work towards closing the transaction, and Genworth remains open to completing the transaction if Oceanwide completes the remaining steps.

In the interim, Genworth is focusing on executing its contingency plan, including a potential partial IPO of Genworth's U.S. Mortgage Insurance (U.S. MI) business, designed to meet its near-term liabilities of approximately $1.0 billion of debt due in 2021. An IPO of U.S. MI will be subject to market conditions as well as the satisfaction of various conditions and approvals. The contingency plan also addresses the need to further align the Company's expense structure with its business activities.

These steps build on the progress Genworth has already made as part of its contingency plan, including the sale of its Canadian mortgage insurance business for approximately $1.8 billion in December 2019 and the completion of a $750 million debt offering at the U.S. MI holding company level in August 2020. In addition, Genworth settled its litigation with AXA in July 2020.

As a result of these actions and other measures to further improve its financial position and manage its operating expenses, Genworth has reduced holding company debt over time and built a solid position of approximately $1.0 billion in cash and liquid assets as of December 31, 2020. Approximately $340 million of this cash balance is ring-fenced to pay for Genworth's February 2021 senior notes at maturity. As previously disclosed, Genworth intends to manage the U.S. life insurance companies on a standalone basis with no plans to infuse capital into those companies in the future, absent an Oceanwide transaction.

James Riepe, non-executive chairman of the Genworth Board, said: "When we considered our most recent extensions of the merger agreement, Genworth's Board of Directors believed we were on a path to a near-term closing based on the information we were provided. Given the most recent update, we do not believe a closing can occur in the near term. Thus, the management team will fully focus its efforts on executing our contingency plan. We appreciate the continuing patience of our shareholders, employees and other stakeholders as we continue to pursue steps that will maximize Genworth's value."

Tom McInerney, Genworth president and CEO, continued: "While we are disappointed that we could not close the transaction by the end of 2020, the parties retain the ability to ultimately complete the transaction if Oceanwide can secure the required funding and the parties can complete the remaining steps to closing, and if the transaction is still in the best interests of Genworth at that time. At the same time, we are moving forward with our contingency plan to meet our near-term obligations and maximize long-term value, which we believe is the best approach for our shareholders."

LU Zhiqiang, chairman of Oceanwide, added: "We believe the value of the transaction is significant for both parties' stakeholders, and are continuing to work towards completing the transaction with Genworth."

The transaction previously received all U.S. regulatory approvals needed to close the transaction. However, given the passage of time as well as the terms of these approvals, the parties will need to assess whether re-approvals or confirmations are necessary at the appropriate time.

Genworth will host an investor call before the market opens on January 5, 2021 to review today's announcement and address shareholder questions. A separate news release with conference call details will be forthcoming, at which time the information for the call will be available on the company's website, http://investor.genworth.com.

This news release is not an offer to sell, or a solicitation of an offer to buy, any securities.