Why Genworth Financial shares fell today

What happened

Actions of Genworth Financial (NYSE: GNW) fell today, down 26% as of 12:05 p.m. EST, after the company provided an update regarding its transaction with China Oceanwide. The couple have been trying to merge since 2016 and have experienced many delays.

So what

By the end of November, the companies had secured an extension of the deal to December 31, but Genworth and Oceanwide decided not to extend the deadline further due to “uncertainty surrounding the completion and timing of the remaining steps required to complete the transaction “. Oceanwide noted that it still has not finalized the financing terms for Hony Capital, and that the COVID-19 pandemic and related restrictions also continue to contribute to the uncertainty.

As long as the merger agreement is still in effect, either party can terminate the agreement at any time. Oceanwide will always endeavor to complete the acquisition.

“When we reviewed our latest extensions to the merger agreement, Genworth’s board of directors felt that we were on track for a near-term close based on the information provided to us,” said President James Riepe said in a statement. “Based on the most recent update, we don’t think a close can happen in the short term.”

Now what

Genworth has said it will now turn to its contingency plan, which could potentially include a partial IPO of its mortgage insurance business in the United States. This would help it deal with $ 1 billion in short-term debt that will fall due in 2021. The company has taken a number of steps in recent years to improve its financial position, including selling off its mortgage business. Canadian at the end of 2019.

At the end of 2020, Genworth had $ 1 billion in cash and liquid assets. The company plans to run its life insurance business in the United States on a stand-alone basis, even if the Oceanwide transaction fails. Genworth will hold an investor call tomorrow morning to discuss the update.