The proposed merger between Genworth Financial Inc. and China Oceanwide Holdings Ltd. has been delayed by the regulatory review process, but at the state level things could be progressing with the possible calendar date for a hearing overseen by Delaware regulators to be decided this month.
"We hope to be able to schedule the hearing by the end of the month," said Mitch Crane, deputy commissioner for the Delaware Department of Insurance in an email Aug. 2.
A notice usually goes out a few weeks before the actual date of the hearing, meaning the hearing could be held in September. State regulators then make a decision after reviewing the record under the regulatory process. The merger deadline for the Genworth-China Oceanwide deal was extended from Aug. 31 to Nov. 30 to give regulators more time for review.
All eyes are now on the regulators who must approve the deal, first announced publicly last October. In addition to Delaware, other key states where approval is needed are New York and Genworth's domiciliary jurisdiction, Virginia. The transaction must also get approval from the Committee on Foreign Investment in the United States, or CFIUS, where it has already undergone two periods of review, and is now on its third installment.
On July 13, the companies again refiled their "joint voluntary notice" to CFIUS, kicking off a new 30-day review period, which may be followed by an additional 45-day investigation period.
In addition to clearance by CFIUS and state regulators, the closing of the proposed transaction remains subject to regulatory approvals in China and other international jurisdictions, and other closing conditions.
"Genworth and Oceanwide continue to be actively engaged with the relevant regulators regarding the pending applications," Genworth stated in its second-quarter earnings release.
The applicant "continues to be responsive to Bureau inquiries regarding the application," said Virginia State Corporation Commission spokesman Ken Schrad in an email Aug. 2. Virginia's Bureau of Insurance falls under the SCC. The Bureau "continues its review of the application and the applicant keeps the Bureau apprised of developments involving other required regulatory steps," Schrad said.
The U.S. Treasury Department, which chairs CFIUS, did not respond to an inquiry on the merger application and does not comment on specific companies before CFIUS, where proceedings are confidential. However, a Treasury spokesman said in late June in an email that CFIUS has had 121 cases year-to-date, compared with 74 the prior year, indicating a possible backlog of cases.
A New York Department of Financial Services spokesman said the DFS had no update.
Many investors and analysts have had a keen interest in the deal's outcome.
"We don't profess to have a clear insight into how the CFIUS process will play out, given the intersection of geopolitical risk and other Washington issues," Wells Fargo Securities analyst Sean Dargan wrote in a research note. He noted that Genworth has made clear that state regulatory approval "does not work in tandem" with CFIUS.
It is Delaware's regulatory body that must decide if the $525 million capital contribution offered by China Oceanwide, plus the $175 million commitment from the Genworth holding company into its long-term care entity, Genworth Life Insurance Co. or GLIC, is adequate consideration for the proposed "de-stacking" of its life and annuity subsidiary out from under GLIC, Dargan explained.
"To us the most important state issue is in Delaware," he wrote.