Beijing firm in $5.3b deal to take control of US insurer

HONG KONG • Little-known China Oceanwide Holdings Group has pledged US$3.8 billion (S$5.3 billion) in a deal to take control of US insurer Genworth Financial, the latest marker of Chinese firms accelerating a drive overseas while their domestic economy slows and the yuan weakens.

Founded by low-profile but well-connected billionaire Lu Zhiqiang, the Beijing-based investment firm agreed to pay US$2.7 billion in cash to buy all Genworth shares, the firms said on Sunday.

Oceanwide also committed a further US$1.12 billion to cover Genworth debt maturing in 2018, as well as life insurance claims charges faced by the firm spun out of General Electric in 2004.

Genworth has seen its share price fall by nearly two-thirds in the last 24 months while battling low interest rates and trying to stabilise its troubled long-term health insurance arm.

The boards of both firms backed the deal, reached after two years of "extensive review" by Genworth's board. But the transaction remains subject to regulatory approvals, and likely will not close before the middle of next year, they said, without disclosing the exact source of the deal's funding.

The striking of a near-US$4 billion deal by an unlisted Chinese firm that few outside the country know of highlights how determined mainland buyers have become in a hectic year for chasing overseas assets. So far, 2016 has seen Chinese companies launch a record US$181 billion of overseas mergers and acquisitions - about 70 per cent more than the whole of last year.

Chinese investment holding firms have joined insurers such as Fosun International and unlisted Anbang Insurance Group in leveraging accumulated capital to buy global assets.

Some recent purchases have also come from Chinese property companies keen to reduce reliance on their home market.

Some recent Chinese bids have attracted intense regulatory scrutiny overseas. But rarely has an insurance deal by a Chinese acquirer been blocked outright by international watchdogs, according to people familiar with these transactions.

Founded by Mr Lu in 1985, Oceanwide - described by Genworth president and chief executive officer Tom McInerney as "an ideal owner" going forward - is also the controlling shareholder of Hong Kong-listed China Oceanwide Holdings, worth about US$1.6 billion by market value.

Mr Lu, born in 1951, has risen through the ranks of Chinese business and officialdom quietly but efficiently. China Oceanwide's operations now span financial services, energy, culture and media as well as real estate assets globally, employing more than 10,000 employees worldwide.

After a job in a diesel engine factory as a teenager, according to official news agency Xinhua, Mr Lu worked in local government, graduated from the prestigious Fudan University and became vice- president of the China Non-governmental Chamber of Commerce while building up his business.

Forbes magazine estimates his net worth at US$5.3 billion.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 25, 2016, with the headline 'Beijing firm in $5.3b deal to take control of US insurer'. Print Edition | Subscribe