Genworth OKS sale of Canadian division to Brookfield

TORONTO Genworth Financial Inc. agreed to sell its Canadian unit to Brookfield Business Partners LP for $2.4 billion as it works to win regulatory approval for its acquisition by China Oceanwide Holdings Group Co.

Brookfield Business Partners will purchase 48.9 million shares, or a 57-per-cent stake, at $48.86 apiece in Genworth MI Canada Inc., giving it majority control of Canada’s largest private-sector residential mortgage insurer.

That’s a 5.1-per-cent discount to Genworth MI’S closing price Monday.

Genworth Financial is looking to “ultimately, moving forward with our long-awaited closing of our merger with Oceanwide,” chief executive Tom Mcinerney said in a statement Tuesday.

Oceanwide’s chairman Lu Zhiqiang said the company is “pleased with the quality of the buyer as well as the purchase price they have offered.”

Shares of Genworth Financial jumped as much as 16 per cent in U.S. trading Tuesday, while Genworth MI Canada traded ex-dividend in Toronto and fell slightly.

Genworth has been working since 2016 to close its Us$2.7-billion buyout by China Oceanwide, a transaction Mcinerney called the “best option” as the Richmond, Va.-based insurer grappled with soaring costs on long-term care policies.

The insurer said in July that it would seek to gauge interest in the Canadian mortgage insurance unit after lack of “any substantive progress” on talks with regulators in that country for the China Oceanwide deal.

Brookfield plans to fund about US$700 million of the purchase on its own and for some of its institutional partners to co-invest alongside it for the rest.

Brookfield agreed to provide an Us$850-million bridge loan to back the transaction, which is expected to close in the second half of the year.

The deal is subject to approval from Canada’s minister of finance.

Genworth and Oceanwide have agreed to extend their merger deadline until Dec. 31.

“Genworth is an industry-leading business that generates strong, consistent earnings and operates in a sector with high barriers to entry,” David Nowak, managing partner of Brookfield Business Partners, said in the statement.