Nobody seems to care, but BBU just rolls on... BROOKFIELD, NEWS, Aug. 13, 2019 (GLOBE NEWSWIRE) -- Brookfield Business Partners L.P. (NYSE:BBU) (TSX:BBU.UN) ("Brookfield Business Partners") announced today an agreement (the “Purchase Agreement”) to acquire an aggregate of 48,944,645 common shares (the “Acquired Shares”) of Genworth MI Canada Inc. (“Genworth Canada” or “the business”) (TSX: MIC), representing an approximate 57% controlling interest in the business, from Genworth Financial, Inc. (NYSE: GNW) for approximately C$2.4 billion (US$1.8 billion) or C$48.86 per share. Immediately prior to entering into the Purchase Agreement, Brookfield Business Partners did not own any common shares in the capital of Genworth Canada (“Shares”).
Genworth Canada, through its subsidiary Genworth Financial Mortgage Insurance Company Canada, is the largest private sector residential mortgage insurer in Canada, providing mortgage default insurance to Canadian residential mortgage lenders, making homeownership more accessible to first-time homebuyers.
“We are very pleased to make this investment in Genworth Canada, a high-quality leader in the mortgage insurance sector,” said David Nowak, Managing Partner, Brookfield Business Partners. “Genworth is an industry-leading business that generates strong, consistent earnings and operates in a sector with high barriers to entry. We look forward to partnering with management to support its ongoing success, drawing on our expertise in insurance and residential real estate.”
Investment highlights:
- Essential service provider to the housing market. Genworth Canada is a strong, high-performing business serving an important role in supporting the stability of Canada’s housing market. Financial institutions in Canada are required to purchase mortgage insurance when residential mortgage down payments represent less than 20% of the purchase price.
- Strong market share. Genworth Canada has established itself as Canada’s largest private sector residential mortgage insurer through a broad underwriting and distribution platform across the country that provides customer-focused products and support services to the vast majority of Canada’s residential mortgage lenders and originators.
- High barriers to entry. Genworth Canada operates in a highly regulated industry with strict capital adequacy requirements, creating natural barriers to entry. The business has established excellent and long-standing relationships with high quality lenders including leading Canadian banks, mortgage finance companies, and other regional lenders and credit unions.
- Long-term, stable earnings and strong cash flows. Genworth Canada has a long-term track record of generating consistent earnings and attractive returns on capital.
- Resilient risk profile. Genworth Canada’s well-established, national footprint provides geographic market and customer diversity to the business. A strong regulatory framework combined with conservative risk management practices of lenders and insurers has contributed to a stable Canadian housing and mortgage sector with consistently low mortgage delinquency rates.
Funding
Brookfield Business Partners intends to fund approximately US$700 million of the purchase on closing and for certain of its institutional partners to co-invest alongside it for the balance.
Brookfield Business Partners has also agreed, between now and the closing of the transaction, to provide Genworth Financial, Inc. with a bridge loan of up to US$850 million that is intended to be repaid from proceeds of the sale of its interest in Genworth Canada.
The transaction, including the bridge loan, will be funded from existing liquidity.
Advisors
BFIN Securities LP, BMO Capital Markets, CIBC Capital Markets, RBC Capital Markets, and Scotiabank acted as financial advisors, and Torys LLP as legal advisors, to Brookfield Business Partners.
Closing
Closing of the transaction is subject to customary approvals, including the approval of the Minister of Finance (Canada), and is expected to occur in the second half of 2019.
The Acquired Shares are being acquired for investment purposes. Brookfield Business Partners may, from time to time, acquire additional Shares or securities convertible into Shares, dispose of such securities or continue to hold the securities of Genworth Canada.
Genworth Financial, Inc. has agreed in the Purchase Agreement to, upon closing of the transaction, cause the nominees of Genworth Financial, Inc. (other than the Chief Executive Officer of Genworth Canada) on the board of directors of each of Genworth Canada and its wholly owned subsidiaries to resign from such positions. Subject to the terms of the Purchase Agreement, the vacancies created by such resignations shall be filled with nominees of Brookfield Business Partners.
Brookfield Business Partners has relied on the private agreement exemption contained in section 4.2 of National Instrument 62-104 – Take-Over Bids and Issuer Bids in agreeing to acquire the Acquired Shares.
Given the short time frame available to complete this transaction, Brookfield Business Partners has no current intention to make an offer for the balance of the outstanding Shares. Brookfield Business Partners may in the future consider the appropriateness of such an offer after discussion with Genworth Canada’s shareholders and other stakeholders.
Read more at https://stockhouse.com/news/press-releases/2019/08/13/brookfield-business-partners-to-acquire-control-of-genworth-canada#RMqUMilMBL5Xlsl7.99