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Clock ticking for Genworth-China Oceanwide midyear target

Time is running out for Genworth Financial Inc. and China Oceanwide Holdings Group Co. Ltd. to close their deal by the stated midyear target, and the transaction still needs regulatory approvals.

The companies have targeted the middle of 2017 for closing the deal. In March, Genworth CEO Tom McInerney said the company remained confident that the deal would overcome drops in its share price and regulatory struggles. In May, a Genworth spokeswoman reiterated that the company continues to target closing the transaction "in the middle of this year."

Insurance departments in Delaware, New York and Virginia — key domiciliary states for Genworth's businesses have either yet to schedule a hearing or have paused work, although a spokesperson for the Virginia State Corporation Commission said a hearing is not statutorily required. The Virginia SCC houses the state insurance regulators in its insurance bureau and its three commissioners all weigh in on decisions for transactions, such as insurance mergers.

State regulators usually give notice of a hearing a few weeks before it takes place, and follow this with a decision-making period of at least a few more weeks.

Although insurance departments continually declined to offer potential time frames for regulatory decisions after a hearing, it is notable that the Delaware Department of Insurance confirmed that there would be a decision about 30 to 45 days from the conclusion of the set of hearings to spin off Brighthouse Life Insurance Co. from MetLife Inc., which began June 5.

As recently as May 30, China Oceanwide submitted another filing for review to the Virginia SCC including an amended organizational chart. Hearings are usually scheduled when all materials are in and the application for the merger is deemed complete by regulators.

This Virginia SCC filing follows copious additional submissions to the department from China Oceanwide, including many audited financial statements sent in April, in the wake of the already-voluminous original "Form A," filed Dec. 8, 2016.

The deal review is "still a work in progress," said Ken Schrad, director of the Division of Information Resources for the Virginia SCC. "The applicant, earlier this year, waived the statutory provision for a hearing within 40 days. So, the Commission will issue a scheduling order when the parties indicate they are prepared to proceed," Schrad said May 25 via email.

The Virginia SCC has only two staffers assigned to the case, a hearing examiner and an associate general counsel, the case account shows.

Separately, New York Department of Financial Services regulators will not actively review the deal until China Oceanwide gets its approval from the Treasury's Committee on Foreign Investment in the United States, or CFIUS, which may not be until the end of June, according to a person familiar with the matter. The deal does not require a public hearing in New York.

Genworth and China Oceanwide reported April 28 that they had withdrawn and re-filed their application to CFIUS to permit more time for review and discussion.

"Earlier this month, we provided CFIUS with additional information to support our application. CFIUS notified us that they would need additional time to continue to review our application," Genworth spokeswoman Julie Westermann said in an email April 28. She noted that there is no statutory provision to simply extend the review period, but instead, companies must withdraw and refile their application.

"Genworth and Oceanwide are diligently working with regulators who are reviewing our transaction; however, our policy is not to discuss our conversations with our regulators," Westermann said in late May, when asked about the progress of the merger and regulatory activity.

Spokespersons for the Delaware and Virginia regulators would not comment on any speculation on timing for a completion of their reviews or hearing dates. Delaware is required to hold a public hearing.

"As indicated previously, the review of the transaction is still underway with the Delaware Department of Insurance. It is Department policy not to comment on transactions pending before the Department," said Vincent Ryan, senior adviser to the Delaware Insurance Commissioner, in an email June 1.

Lawyers for China Oceanwide did not return emails. The Treasury Department said it does not comment on the CFIUS process.

Genworth and China Oceanwide signed their merger agreement October 21, 2016. A December 2016 securities filing shows discussions began in May 2015 when representatives of Willis Securities Inc., a financial adviser hired by an indirect subsidiary of China Oceanwide, contacted Genworth's McInerney to indicate that China Oceanwide was interested in a potential transaction. In the year or so prior to the merger announcement, Genworth negotiated with other unidentified companies and discussed the proposals and restructuring plans with state regulators, the preliminary proxy filing shows. State regulators had many questions about the suitors, the restructurings and the general terms of any merger or sale of the company.

It was almost a year ago, on June 10, 2016, that Genworth's representatives informed the Delaware Department of Insurance of the potential sale of the entire company to China Oceanwide.

The merger agreement could potentially be terminated by mutual consent if the deal is not completed by Aug. 31, although that date can be extended.