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Fourth Time Lucky?

03 October 2017 by lberuti

In March this year, GNW’s ( Genworth Financial Inc ) shareholders approved the $2.7bln takeover of the company by China Oceanwide Holdings Group Co. announced in October 2016. Since then, regulatory hurdles to win US approval have proven insurmountable for both companies. Yesterday, they said they have withdrawn their voluntary notice to the Committee on Foreign Investment in the US - which scrutinizes the acquisitions of US companies by foreign entities - for the third time. Both companies are still committed to the deal, but the clock is ticking for GNW. It has to address debt maturing in 2018. The longer it operates on a stand-alone basis, the more pressure on the ratings of its US Mortgage Insurance Unit, which is its most valuable business. China Oceanwide reaffirmed that “GNW remains a critical part of (their) strategy to bring long term care and other insurance solutions to China”, but investors saw this latest development as bearish regarding the closing of the transaction. GNW’s stock tumbled roughly 13% and its risk premium was pushed 93bps to 753bps compared with last Friday.