The Strategist

China Oceanwide to buy an American insurer for 2.7 billion

10/24/2016 - 16:38

Genworth Financial Inc., the dominant operator in the field of long term insurance for health care in the United States, agreed to sell its business to Chinese investment company Oceanwide because of low interest rates and rising prices, says The Wall Street Journal.

Taber Andrew Bain via flickr
Taber Andrew Bain via flickr
Chinese Investment company China Oceanwide Holdings Group will pay about $ 2.7 billion for Genworth. In the past two years, China Oceanwide has invested aggressively in commercial and residential real estate in the United States. Based in Beijing, the company was founded by businessman Lu Zhiqiang in 1985.

Genworth Company has become one of victims of the property bubble in the United States, and suffered from very low rates consequently.

Since its inception, China Oceanwide has evolved from a local developer in the eastern part of China to a  national conglomerate with investments in banking, insurance and technology industries.

China Oceanwide will pay $ 5.43 for one share of Genworth, while papers of the US insurer were traded at $ 5.21 each on Friday’s auction. The deal stipulates that China Oceanwide have to send about $ 600 million to repay Genworth’s debt in 2018. The company’s division of life insurance will also receive $ 525 million.

The deal will help Genworth to complete program of life insurance restructuring previously announced by the US authorities. Once the agreement is signed, Genworth will remain an autonomous company within China Oceanwide, and senior management of the insurance company will continue to conduct business from its headquarters in Richmond, Virginia.

Genworth is a native of General Electric. It had separated from its parent company in 2004, and quickly launched a campaign to gain a foothold in the market.

China, the second largest economy in the world, for the first time overtook the US in terms of acquisition of foreign assets. As of mid-October 2016, Chinese companies have invested $ 206.6 billion in foreign companies, which is 212% more than the same period last year. Volume of foreign M&A-deals made by US companies for the same period amounted to $ 179.1 billion, according to Bloomberg, citing its own research. 

The greatest number of assets acquired by Chinese investors in 2016 falls on Europe, where volume of M&A deals involving Chinese companies exceeded $ 70 billion, Bloomberg’s data show.

The second most popular region was North America, in which assets Chinese investors have already invested about $ 60 billion this year. Assets in the Asia-Pacific region are also popular. Total value of assets acquired by Chinese companies there have exceeded $ 50 billion in 2016.