Takeaways
- Genworth today, March 19, clarified the reasons behind apparent delays in obtaining Chinese foreign currency control approvals for its acquisition, telling Reorg M&A that action by the State Administration for Foreign Exchange, or SAFE, will follow conclusion of Canada’s regulatory review.
- A spokesperson for the company told Reorg M&A that “in the order of things, SAFE/China clearance will follow Canada’s approval.”
- The merging parties have previously disclosed that the global trade tensions between the U.S. and China had caused the foreign currency control reviews to be delayed. This explanation was also restated during the Delaware Insurance Department hearings, which took place in November after the National Development and Reform Commission had cleared the transaction, paving the way for SAFE review. The parties had not provided any other specific update on timing or the reasons for delay since that time.
Genworth Financial today, March 19, clarified timing of expected approvals from Chinese foreign currency regulators, telling Reorg M&A that action by the State Administration for Foreign Exchange, or SAFE, will follow the conclusion of Canada’s regulatory review.
Julie Westermann, Genworth Financial’s senior director of public relations, told Reorg M&A in an email exchange that “in the order of things, SAFE/China clearance will follow Canada’s approval.”
Westermann said that she was clarifying the intent of previous
disclosures regarding the sequencing of the foreign currency approvals. Nevertheless, this is the most explicit substantive explanation the company has given for the apparent delay in receiving SAFE approval since the Delaware Insurance Department
hearing on Nov. 28. At that proceeding, executives from both Genworth and China Oceanwide cited global trade tensions as the primary reason behind the delays in obtaining Chinese approvals, which in turn created the need to revise their application to include an alternative financing structure to include utilizing $1.76 billion in personal funds of China Oceanwide CEO Lu Zhiqiang that were located in offshore accounts.
In their January
announcement extending the termination date to March 15, the merging parties stated that part of the extension was “in consideration … of the Chinese New Year/Spring Festival” holiday which began on Feb. 4. The termination date has since been extended to
April 30.
Genworth’s explanation for the delay in SAFE approval effectively decouples it from the trade tensions previously cited and therefore should be viewed as a positive sign for the deal’s eventual close. The explanation also addresses concerns, as raised at the Delaware hearing, that the delay was the result of financial distress at China Oceanwide itself. Reorg M&A has previously
reported about China Oceanwide’s efforts to raise cash and reduce debt in the weeks following the Dec. 21 final approval from the Delaware Insurance Department.
The remaining regulatory hurdle in Canada requires the merging parties to obtain approval from the Office of Superintendent of Financial Institutions Canada and Department of Finance Canada, including a national security review for the protection of policyholder personal data. Genworth MI Canada is the largest private mortgage insurer in Canada. Reorg M&A previously
reported that Genworth MI executives and lobbyists have had at 21 reported meetings with Canadian officials since January in support of the transaction.
Reorg M&A’s previous coverage of this transaction can be found
HERE.
--Andrew Lowenthal