China Oceanwide Holdings Group Co., Ltd., a Beijing-based financial holding company founded by Chinese billionaire Lu Zhiqiang (pictured), has agreed to acquire struggling U.S. mortgage and long-term care insurance firm Genworth Financial, Inc. for about US$2.7 billion, the companies announced.
China Oceanwide will pay US$5.43 per share in cash for New York Stock Exchange-listed Genworth, whose shares closed trading on Friday at US$5.21.
In addition, China Oceanwide has committed to contribute US$600 million in cash to address Genworth's debt maturing in 2018, as well as US$525 million of cash to the U.S. life insurance businesses, in a deal structure the companies say would increase the likelihood of obtaining regulatory approval.
Genworth has struggled since the global financial crisis, as its earnings were hurt by the bursting of the real estate bubble and ultra-low interest rates.
The 64-year-old Lu Zhiqiang, whose worth is estimated at US$5.2 billion by Forbes, has been diversifying his business empire with more deals overseas, in particular in the U.S.
Last year, China Oceanwide said it would acquire two New York properties for US$390 million, after announcing plans to build the second-tallest tower in San Francisco. In addition, Lu has also personally purchased three giant mansions in Silicon Valley for a total of US$76 million since 2012.
The Genworth deal appears to be strategic as Lu has been aggressively expanding China Oceanwide's financial businesses in China.
In 2015, Lu's real estate business, Shenzhen-listed Oceanwide Holdings, said it would set up China's first private reinsurance company with fellow billionaires Shi Yuzhu's Giant Investment and Fu Kwan's Macrolink Real Estate. In addition, Oceanwide Holdings announced it would invest US$643 million to set up four finance companies.
Lu also serves as vice chairman of the board at China Minsheng Bank, and has recently acquired more shares of the bank amidst a public fight to wrestle control of the institution by its major shareholders.
China Oceanwide intends to make Genworth a standalone subsidiary after the completion of the deal, and may seek ways to harvest business synergies among its Chinese financial businesses and the U.S. insurer.
"Genworth is an established leader in both mortgage insurance and long term care insurance, which are markets that present significant long-term growth opportunities," Lu said in a statement.
The transaction, which has been approved by both companies' boards of directors, is expected to close by the middle of 2017, subject to approval by Genworth's stockholders as well as certain other closing conditions, including the receipt of regulatory approvals.
Lu was born in Shandong province and founded China Oceanwide in 1988. The company initially focused on residential property development and is behind one of the largest high-end apartment buildings in Beijing, Beijing Guangcai International Apartments.
The company expanded to banking, insurance, securities and energy sectors later on. It entered the insurance industry in 2002 as one of the co-founders of Minsheng Life Insurance, one of the six national insurers supervised by China Insurance Regulatory Commission.