Shares of Genworth Financial Inc (NYSE:GNW) sank on Thursday as the market reacted to reports that the company’s planned merger with a Chinese firm may not close at the originally targeted timeframe because of regulatory delays.
Genworth is selling itself to China Oceanwide for $2.7 billion. The companies announced their agreement to merge in October 2016 and Genworth’s shareholders subsequently approved of the deal in a March 2017 vote.
Despite approval by shareholders, Genworth cannot complete its sale to Oceanwide unless it has obtained several regulatory clearances. The proposal to merge Genworth with Oceanwide is being reviewed by U.S. and international government regulators. One of the government agencies reviewing the deal in the U.S. is the Committee on Foreign Investment in the United States, or simply CFIUS.
Getting past CFIUS proves a challenge
While several U.S. regulators have approved Genworth’s deal with Oceanwide, getting the clearance of CFIUS has proved to be a challenge for the companies. In a press release Thursday, July 13, Genworth and Oceanwide said that they had re-filed a joint notice with CFIUS.
The consequence of the notice re-filing is that it increases the time that CFIUS will take to review the deal. Under the re-filed notice, the CFIUS has another 30 days to review the deal. On top of that, the agency has 45 days to do investigation.
As such, the re-filing of the new joint notice implies that Genworth and Oceanwide wouldn’t meet their target to complete the merge by the middle of 2017. The companies had set for themselves a deadline of August 31 to complete the transactions, but they are now discussing extending that deadline.
Despite the regulatory delays, Genworth insists that emerging with Oceanwide is the best move for its shareholders, customers as well as other stakeholders.
“The Genworth Board is fully committed to closing the transaction because it is the best option for our shareholders. This transaction also achieves the best outcome for the policyholders of our insurance companies and other important stakeholders,” said Genworth president and CEO Tom McInerney.
Shares of Genworth fell nearly 1.2% on Thursday to end the regular session at $3.44. But the stock gained more than 1.7% in afterhours trading.
