Summary
In October 2016, Genworth and China Oceanwide executed a Merger Agreement pursuant to which China Oceanwide will acquire Genworth for $5.43/share in cash.
The final approvals for the merger are now lining up, with Genworth's principal insurance regulator holding a public hearing on the merger in less than four weeks (on November 28th).
Given the incentives of the parties involved and the facts on the ground, we believe the China Oceanwide merger is very likely to be approved by the remaining applicable regulators.
A recently published Genworth short thesis regarding the merger will in our opinion inevitably be disproven for the reasons stated herein.
Ever since Genworth Financial (GNW) and China Oceanwide Group announced the signing of their merger agreement back in October 2016, GNW shareholders have patiently waited for the merger to close and thereby receive the promised $5.43/share in cash for their stock. In June 2018, GNW and China Oceanwide received the long-desired CFIUS approval for the transaction, which many market observers previously believed could potentially imperil the deal, and just a few days ago came the announcement that the Delaware Department of Insurance has scheduled a hearing regarding the merger on November 28th. As we explain further below, we believe that the incentives of the respective parties involved (namely, GNW, China Oceanwide, the regulators and GNW's current and prospective policyholders) and the facts on the ground (specifically, GNW's discussions with the regulators and the most recently available financial statements for China Oceanwide) point to the ultimate approval of the deal in the fairly near future (GNW's management recently stated on their Q3 2018 earnings call that they expect the deal to close by the end of 2018). Thus, we estimate that the transaction's likelihood of consummation has now risen to about 90% (up from 75% when we first reviewed the deal back in January 2017).
