What happened

Shares of Genworth Financial (GNW -0.66%) traded up 14% on Tuesday morning after the insurance giant announced the sale of its Canadian unit for 2.4 billion Canadian dollars ($1.8 billion). The divestiture is the latest chapter in Genworth's long-running quest to be acquired by a Chinese suitor and could simplify the path for a deal to eventually get done.

So what

In October 2016, China Oceanwide Holdings announced plans to acquire Genworth, a one-time subsidiary of General Electric, for $2.7 billion, but regulatory hurdles have complicated matters in the years since. The proposed deal has been extended 12 times so far while awaiting regulatory approval, with the latest extension announced Tuesday.

Two businesspeople shaking hands.

Image source: Getty Images.

One of the hurdles to completing the Oceanwide deal was Canadian regulatory authorities, but the sale of Genworth's majority stake in Genworth MI Canada to Brookfield Business Partners (BBU -3.60%) should eliminate that complication. In a statement announcing the move, Genworth said that even if the Oceanwide transaction is not consummated, the sale of the Canada operation would give it increased financial flexibility.

"We are pleased to find such a high-caliber buyer for our interest in Genworth Canada," company CEO Tom McInerney said. "We look forward to working with Brookfield Business Partners through the sale process and required regulatory approvals and, ultimately, moving forward with our long-awaited closing of our merger with Oceanwide."

The Oceanwide/Genworth deal has been approved by the Committee on Foreign Investment in the U.S. but still needs clearance in China for currency conversion. Given the continued tensions between the U.S. and China, there are no guarantees that approval will come quickly.

Now what

As long as the merger agreement hovers over Genworth, this is more of a speculative play than an investment. Shares of Genworth, even with the Tuesday pop, still trade at nearly a 20% discount to the proposed $5.43 per share buyout price. That's a nice payday should Oceanwide ever win final approval to acquire Genworth but also a sign of how uncertain that outcome is.