China Oceanwide Gets US Green Light for $3.8B Genworth Deal

The US federal government has given the green light for Beijing-based real estate investor China Oceanwide Holdings Group to take over American insurer Genworth Financial, nearly 20 months after the $3.8 billion deal was first announced.

The approval by the Committee on Foreign Investment in the United States (CFIUS) marks a rare recent win for a Chinese firm acquiring US assets, amid heightened scrutiny of investment from the PRC. The news also comes as rival Chinese property players including Dalian Wanda Group, Greenland Group and HNA Group suffer sharp setbacks in the US and other overseas markets.

Oceanwide, a privately held conglomerate which controls Shenzhen-listed developer Oceanwide Holdings as well as investment firm Minsheng Holdings, which is listed on the same exchange, has splashed out on some $1 billion of property acquisitions in the US, including a project slated to become San Francisco’s second-tallest skyscraper. The company chaired by billionaire Lu Zhiqiang also purchased US tech investment and media firm International Data Group (IDG) in March of last year.

CFIUS Gives the Nod After 20-Month Review

To satisfy CFIUS that the proposed deal does not pose a national security threat, Oceanwide and Genworth agreed to take special measures to safeguard customer information. Genworth will use a US-based, third-party service provider to manage the personal data of the company’s US policyholders, according to a joint announcement by Oceanwide and Genworth over the weekend.

The transaction still awaits state-level regulatory approvals in the US and other reviews in international jurisdictions including China. Oceanwide first announced plans to acquire Genworth in October 2016, agreeing to pay $2.7 billion in cash or $5.43 per share for the Richmond, Virginia-based mortgage and life insurance firm. NYSE-listed Genworth currently trades at $3.81 per share. Under the terms of the deal, Oceanwide will also provide a cash infusion of $1.1 billion to the struggling Fortune 500 firm.

The deadline for the merger agreement was extended four times as CFIUS pondered the case. “Successfully concluding the CFIUS process is a major step in our efforts to complete this transaction, which will strengthen Genworth’s financial position and allow us to bring Genworth’s insurance expertise to China,” Oceanwide’s chairman commented in the statement.

Genworth, one of the industry’s largest providers of long-term care insurance, has roughly 3,500 employees and annual sales exceeding $8 billion.

Oceanwide Adds Insurance to US Portfolio

Founded in 1985, Oceanwide group has around around 10,000 employees worldwide and $43 billion in total assets, according to its corporate website. The company’s wide-ranging interests include commercial property investments in Shanghai as well as a stake in China’s Asia-Pacific Property and Casualty Insurance.

Oceanwide dove into US real estate in December 2013 by buying the Fig Central (since renamed Oceanwide Plaza) mixed-use development project in Los Angeles for a reported $200 million. The complex, with a total price tag of $1 billion, recently celebrated its topping-out ahead of its scheduled opening next year.

Oceanwide also paid $296 million in 2015 to pick up a site at First and Mission Streets in San Francisco where it will build Oceanwide Center, a $1.6 billion mega-project that will feature two mixed-use skyscrapers of 54 and 61 stories. The developer later shelled out $390 million for a pair of redevelopment sites in Manhattan’s South Seaport area in the same year.

Along with acquisitions in Hawaii, Oceanwide has committed at least $989 million to sites across the US in less than five years.

Other Chinese Firms Not So Lucky

Oceanwide’s acquisition of Genworth is the biggest publicly reported Chinese investment to win CFIUS approval during the Trump administration. The secretive inter-agency committee overseen by the US Treasury Department has recently shot down a series of sensitive Chinese deals on national security grounds, including the sale of MoneyGram to Alibaba affiliate Ant Financial and a plan by conglomerate HNA Group to buy investment firm SkyBridge Capital.

Chinese property investors in the US have also been stymied by official curbs closer to home, as Beijing scrutinises overseas investments by the mainland’s most acquisitive firms. Cash-strapped HNA Group, which chalked up the biggest Chinese deals in the US last year, is now unwinding its offshore acquisitions including a $6.5 billion stake in hotel operator Hilton, to fend off regulatory and financial pressure.