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Genworth shares slide 34% premarket as China Oceanwide deal faces further delay

Shares of insurer Genworth Financial Inc. GNW, -8.25% slid 34% in premarket trade Monday, after the company and China Oceanwide Holdings Group Co. Ltd provided an update on their merger agreement. “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,” the companies said in a joint statement. The delay since the two companies last agreed to extend the agreement on Nov. 30 is due to the COVID-19 pandemic and related restrictions as well as the need to finalize financing terms with Hony Capital, said Oceanwide. The merger agreement remains in effect, but either party can terminated it 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,” said the statement. In the meantime, Genworth is focused on executing its contingency plan, which includes a potential partial initial public offering of its U.S. mortgage insurance business, which seeks to meet near-term liabilities of about $1 billion o f debt that comes due in 2021. Genworth has already sold its Canadian mortgage insurance business for about $1.8 billion in December of 2019 and raised $750 million in debt at the U.S. MI holding company level in August of 2020. The company now has about $1 billion in cash and liquid assets as of Dec. 31, about $340 million of which is ringfenced to cover February 2021 senior notes at maturity. “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,” non-executive Chairman James Riepe said in a statement. “Given the most recent update, we do not believe a closing can occur in the near term.” Shares have fallen 13.5% in the last 12 months, while the S&P 500 SPX, +0.64% has gained 16%.

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