There are several updates since our February report. Genworth (NYSE:GNW) holders approved the sale of the company to China Oceanwide (OTC:HHRBF) (CO) for $5.43 per share. Although, we advised that the company was worth more and GNW had "sandbagged" the value of the company in the proxy statement, mostly passive institutional investors approved the sale, with 30% of holders abstaining. This could lead to the 262-claim problem we outlined in our first report on November 21. GNW massively exceeded its own 2017 earnings estimate, in the proxy statement, of 66 cents per share by posting diluted earnings of 71 cents per share in the first two quarters. At this point, our sum-of-the-parts value is $9.63. The biggest concern is that management does not anticipate and properly hedge a possible deal failure. GNW can still easily achieve the payment of maturities and the purchase of GLAIC from GLIC without the completion of the merger (as outlined later). We predict a slight cash build at the holding company throughout the end of 2017, as tax transfer payments are collected and the international subsidiaries remit a further $75 million in dividends along with the possibility of the first dividends from U.S. MI. The milestones reached and remaining milestones for deal completion are listed below:
- Shareholder approval (COMPLETED)
- Unstacking approved (altering subsidiary structure to receive regular dividends from GLAIC) (COMPLETED)
- State approvals (led by Delaware)
- International approvals
- CFIUS approval
At this point, we have had positive comments from New York and Delaware regulators.
