Genworth Financial can’t shut the door on being purchased by one of China’s largest companies just yet, as it possibly faces another class action lawsuit from disgruntled shareholders and customers.
China Oceanwide Holdings Group announced last year that it plans to buy Genworth Financial, one of the U.S.’s largest mortgage insurers, for $2.7 billion, but the deal isn’t closed quite yet.
At the time of the announcement, Genworth noted that the transaction is subject to approval by its stockholders as well as other closing conditions, including the receipt of required regulatory approvals.
However, it's important to note that both lawsuits are asking for class action status, with the cases following similar lawsuits in the past.
According to an article in Richmond BizSense by Michael Schwartz:
Genworth Financial was sued twice in the last four weeks in Richmond federal court: once by a group of shareholders who argue its deal with suitor China Oceanwide isn’t in their favor; and the other by a group of customers from its long-term care insurance business, which has caused significant financial losses for the firm in recent years.
A main factor behind the Genworth acquisition was to address the company’s long-term care financial issues.
As part of the purchase, the companies said that China Oceanwide plans to contribute $600 million of cash to Genworth to address the company’s debt maturing in 2018, on or before its maturity, as well as $525 million of cash to the U.S. life insurance businesses.
Genworth said that the China Oceanwide deal is expected to “mitigate the negative impact” of these charges on Genworth's financial flexibility and facilitate it’s ability to complete its previously announced U.S. life insurance restructuring plan.
Genworth told Richmond BizSense that it does not comment on litigation.
