Shares of Genworth Financial (GNW 2.97%) have plummeted today, down by 26% as of 12:05 p.m. EST, after the company provided an update regarding its transaction with China Oceanwide. The pair have been trying to merge since 2016 and have run into numerous delays.
In late November, the companies had secured an extension for the deal until Dec. 31, but Genworth and Oceanwide have decided not to extend the deadline further due to "uncertainty around the completion and timing of the remaining steps required to close the transaction." Oceanwide noted that it has still not finalized financing terms from Hony Capital, and the COVID-19 pandemic and related restrictions also continue to contribute to uncertainty.
While the merger agreement is still in effect, either party can terminate the agreement at any time. Oceanwide will still work toward closing the acquisition.
"When we considered our most recent extensions of the merger agreement, Genworth's Board of Directors believed we were on a path to a near-term closing based on the information we were provided," Chairman James Riepe said in a statement. "Given the most recent update, we do not believe a closing can occur in the near term."
Genworth says it will now turn its attention toward its contingency plan, which could potentially include a partial IPO of its U.S. mortgage insurance business. That would help it meet $1 billion in short-term debt that's coming due in 2021. The company has taken a number of steps in recent years to improve its financial condition, including selling its Canadian mortgage business in late 2019.
At the end of 2020, Genworth had $1 billion in cash and liquid assets. The company plans to manage its U.S. life insurance business on a stand-alone basis, even if the Oceanwide transaction falls through. Genworth will host an investor call tomorrow morning to discuss the update.