Oceanwide to acquire US insurer

A Chinese investment company best known for its US commercial and residential real estate projects has agreed to acquire US insurer Genworth Financial Inc in a deal valued at about $2.7 billion.

China Oceanwide Holdings Group Co is buying Richmond, Virginia-based Genworth, which focuses on home mortgage insurance and long-term care insurance. It will pay $5.43 a share to acquire all of Genworth’s outstanding shares. The price is a modest 4.2 percent premium to Genworth’s closing price on Oct 21.

The proposed deal continues the shopping spree by Chinese companies for overseas assets this year as the mainland economy slows.

Oceanwide is a privately held firm that was started by businessman Lu Zhiqiang. In the US, the company has been an active participant in real estate deals through its subsidiaries in California, Hawaii and New York.

“Genworth Financial’s struggle to stabilize its troubled long-term care (LTC) insurance unit, to deliver its holding company and to unlock the value of its US mortgage insurance unit may have proved too challenging,” analyst Mark Palmer of BTIG LLC wrote in research note on Monday.

China Oceanwide has committed to contributing $600 million in cash toward Genworth’s debt maturing in 2018 as well as $525 million in cash to bolster its US life insurance businesses. The transaction, announced on Sunday, is subject to US regulatory approvals and likely would not close before the middle of 2017.

“Given ongoing uncertainty at (Genworth’s) LTC unit, and taking into account the $1.1 billion in additional capital that China Oceanwide agreed to contribute as part of the deal, we believe higher bids for the company are unlikely to emerge,” said Palmer.

. . . Unlock (ing) the value of its US mortgage insurance unit may have proved too challenging.” Mark Palmer, analyst, BTIG

Oceanwide has expanded from a locally based developer in eastern China into a conglomerate with investments in banking, insurance and technology. The company’s first US project was in downtown Los Angeles and the second investment was in Sonoma County, California, a 360-acre project with a winery, a hotel and single-family homes.

The third investment was Oceanwide Center, acquired in 2015. It includes two towers at First and Mission streets in San Francisco.

The First Street Tower will be 850 feet tall with more than 1 million square feet of office space, and more than 100 luxury condominiums.

The Mission Street Tower will be 605 feet with more than 155 luxury condominiums and a five-star luxury hotel. When completed, the First Street Tower is expected to be the second-tallest building in San Francisco.