Author Topic: GNW - Genworth Financial  (Read 33895 times)

johnpane

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Re: GNW - Genworth Financial
« Reply #70 on: January 26, 2017, 08:00:25 PM »
This is a crazy situation, I've continued to add.  Price is falling with no end in sight.

Blackrock sold out of their position. 

Blackrock did not sell out of their position. Earlier this week they filed a 13G indicating they owned 9.4% of the shares effective 12/31/16, down from 9.6% on 12/31/15.

https://www.sec.gov/Archives/edgar/data/1276520/000035348017000711/genworth.financial.txt
https://www.sec.gov/Archives/edgar/data/1276520/000021545716002831/genworth.financial.2015.txt

Yesterday WFC releases a weird revision based on the proxy financials.  Yet China Oceanwide had seen the financial projections when they made the offer.  And at the same time the company releases a PR saying the day is still on, everything going according to plan with an expected close in Mid-2017.

If someone has a copy of the actual Wells Fargo report, please send. All I have to go on is what Seeking Alpha's Jason Aykock reported. He implies Dargan's prediction is based on "... China Oceanwide could cut price after seeing an expected 2016 loss of $0.41/share vs. estimates for a $0.04 gain."

The merger agreement seems to explicitly say that failing to meet a forecast or estimate is not a Company Material Adverse Effect. No Company Material Adverse Effect is a condition of the merger. [Section 7.2(e)] (Failure to meet a condition would enable China Oceanwide to cancel the merger -- the ability to change the offer price is not mentioned anywhere in the agreement as far as I have been able determine.)

Company Material Adverse Effect "means (x) any material adverse effect on the financial condition; properties, assets and liabilities (considered
together); business; or results of operations of the Company and its Subsidiaries, taken as a whole, or (y) ... provided, however that, in the case of clause (x) above, none of the following, and no facts, events, changes, developments, circumstances or effects (each, an “ Effect”) arising out of the following, shall constitute or be taken into account in determining whether there has been a “Company Material Adverse Effect”:
...
(G) any failure by the Company to meet any forecasts, estimates or representations of revenues, premiums, expenses, earnings or other financial
performance or results of operations for any period prior to the Closing; provided that the exception in this clause shall not prevent or otherwise affect a
determination that any Effect (not otherwise excepted under this definition) underlying such failure has resulted in, or contributed to, a Company Material
Adverse Effect;
..." [excerpted from Section 10]


In my view, there are more likely risks that the merger would be cancelled (e.g., failure to unstack or failure to get government approvals), but in any case the mechanism to change the offer price would seem to be to cancel based on failure to meet a condition (or pay the termination fee)  and then make a new offer instead of walking away.
« Last Edit: January 27, 2017, 06:08:28 AM by johnpane »


johnpane

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Re: GNW - Genworth Financial
« Reply #71 on: January 31, 2017, 09:23:51 AM »
A relevant analysis has just been posted on Seeking Alpha: http://seekingalpha.com/article/4041046-genworth-china-oceanwide-deal-really-risk

Patmo

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Re: GNW - Genworth Financial
« Reply #72 on: January 31, 2017, 04:50:33 PM »
Bad article man, the author should really ask themself whether this $3.47 analyst has insider info ...................................................

Seriously though, pretty good read. One of the more important things pointed out in my opinion is that they structured their deal in as regulator-friendly fashion as they reasonably could. Many people to please though, we will see what happens

valcont

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Re: GNW - Genworth Financial
« Reply #73 on: February 01, 2017, 06:22:30 AM »
I looked at this stock last year but it went in "too hard" pile since I couldn't figure out the LTC sub. That's the elephant in the room and the market is assigning negative equity to that. This article just scratch the surface by just canceling out the $283m of reserve charge with the termination fees. As far as I remember , the market was concerned with the high discount rate that they were applying with fifth of the portfolio due in short term which would amount to much higher reserve requirement than the estimated $300m. How do you guys get comfortable with that in case the deal fell apart?


johnpane

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Re: GNW - Genworth Financial
« Reply #74 on: May 09, 2018, 05:28:21 AM »
Is anyone still watching this situation?

The deal has been in regulatory limbo and the stock was recently languishing at about 2.70, or half of the buyout price.

China Oceanwide has stuck with this deal despite numerous opportunities to back out. GNW has not reported any major financial disasters while this deal has been pending, continues to mitigate LTC issues with premium increases, and successfully refinanced debt due this month.

In the past few weeks, two things have happened that signal increased probability the deal will close in the coming months.
1) CFIUS offered an expedited process for the processing of a refiled "joint voluntary notice", which has provisions to protect U.S. consumer data (seemingly, the only reason CFIUS could reject this merger on national security grounds, which is its purpose after all). (April 24 Press Release)
2) China Oceanwide agreed to close the deal without "unstacking" GLAIC as a subsidiary of GLIC. The unstacking was a major sticking point for gaining approval of Delaware regulators. (Revealed during earnings call, May 2 [strange this wasn't mentioned in the earnings press release])

Last week when #2 was announced the stock was volatile but ended the day little changed. It subsequently has been creeping up.

Yesterday's closing price of $3.14 implies a 58% probability of closing IF the company is worth zero with a deal failure. Both these estimates (probability of closing and the standalone value of GNW) seem pessimistic.

Here is one thought process on GNW as a going concern:
• Assume the holding company never gets dividends or other value from GLIC and its subsidiaries. That part of the company is worthless to shareholders.
• Shareholders are left with the mortgage subsidiaries and holding company cash and debt. This is $2.1B in equity or $4.23 per share.
• The big risk here is the ability to refinance debt next due in 2020, or poor ratings (or other factors) hindering the MI business.
• Bankruptcy may be a long-term possibility but there is a lot of time available to take evasive actions, even if it means liquidating.
This seems like it's worth something more than zero. I think $2 per share, less than half of book value, may be a reasonable value to ascribe.

As for the probability of deal closure, I'd put it closer to 80%.

Combine the two (0.8*5.43 + 0.2*2) and you get an expected value of $4.74, 50% upside from yesterday's close. Of course, the actual result is binary, either 73% gain (exact) or 37% loss (estimated).

 I'm very interested to hear others' input on this.
 

StevieV

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Re: GNW - Genworth Financial
« Reply #75 on: May 09, 2018, 08:07:08 AM »
The deal closing is hard to handicap.  But, as you suggest, I think the odds have gone up recently.  I used to think it was more likely than not that the deal wouldn't close.  I haven't reconsidered recently, but I think that may have flipped.

Importantly, the business seems to be doing ok.  GNW's operations don't need to be that great to justify the current stock price.

Putting that together, I would tend to agree that the expected value of GNW is above today's price.

johnpane

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Re: GNW - Genworth Financial
« Reply #76 on: June 09, 2018, 10:21:47 AM »
« Last Edit: June 09, 2018, 10:25:21 AM by johnpane »

StevieV

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Re: GNW - Genworth Financial
« Reply #77 on: June 11, 2018, 11:48:03 AM »
CFIUS is allowing the transaction to go forward.

I estimate a 95% probability the deal closes now that this hurdle is passed.




http://investor.genworth.com/investors/news-releases/archive/archive/2018/Committee-on-Foreign-Investment-in-the-United-States-Completes-Review-of-Proposed-China-Oceanwide-and-Genworth-Financial-Transaction/default.aspx

I also think it is very likely the deal goes through now.  Obviously, the market (correctly, IMHO) saw this as the big hurdle.  Now there is about a 12% discount to the buyout price.


StevieV

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Re: GNW - Genworth Financial
« Reply #78 on: June 13, 2018, 06:50:23 AM »
The price is drifting back down a bit from the post-announcement bump.  Buyout price is now a little bit more than 16% above the current price.

I am looking for about $5.20 to dispose of my small stake (depending on the timing).  Not sure if that is the right number.