Genworth to Raise Up to $700 Million in Australia Sale
Genworth Financial Inc. (GNW) plans to raise as much as $700 million by selling a minority stake in its Australian mortgage guarantor, in what may be the biggest share sale in the country for more than three years.
The seller of life insurance and long-term care coverage will offer 30 percent to 40 percent of the Australia unit’s outstanding shares and would raise at least $400 million, according to a statement today. The Richmond, Virginia-based company will sell as many as 260 million shares at A$2.20 to A$2.90. It will start trading on May 20 with a market capitalization of as much as A$1.86 billion ($1.7 billion).
The initial public offering, first slated for 2012, increases liquidity at Genworth, which hasn’t paid a dividend since 2008 and last authorized share repurchases the year before that. Chief Executive Officer Tom McInerney has been selling assets to bolster Genworth’s credit grade and focus on his company’s main businesses.
“What now enters into the equation is whether some of those proceeds could potentially be used for capital returns,” Mark Palmer, an analyst at BTIG LLC, said in an interview before today’s announcement. “It’s also about diversifying away from Australia.”
Genworth slipped 2.2 percent to $17.31 at 9:36 a.m. in New York, cutting its advance for the year to about 11 percent. The insurer doubled in 2013 as rising home prices helped the company’s U.S. mortgage insurer post its first profit since 2007. The policies reimburse lenders for losses when homeowners default and foreclosures fail to recoup costs.
Before Genworth’s share sale, companies had raised A$1.2 billion through IPOs in Australia this year, quadruple the amount of the same period of 2013, according to data compiled by Bloomberg. At A$700 million, the Genworth IPO would be the largest since Westfield Retail Trust raised A$835 million in November 2010 after being spun out of Westfield Group.
Genworth announced plans in November 2011 to sell as much as 40 percent of the Australia unit in the second quarter of 2012. The company postponed the plan in April 2012, citing higher-than-expected losses. The stock tumbled 24 percent the following day.
Michael Fraizer resigned as CEO about two weeks later. Chief Financial Officer Martin Klein filled the role on an interim basis until McInerney started at the beginning of 2013.
In October, McInerney said the IPO of the unit would help Genworth reduce its risks tied to Australia’s economy. He said that the country was vulnerable to slowing growth in China, where economic expansion cooled to a 7.7 percent pace in 2012 from 9.3 percent a year earlier. McInerney also said it was unclear how new rules on bank capital would affect lenders’ use of home-loan guarantees in Australia.
Operating profit was $228 million at the Australia unit in 2013, 61 percent more than a year earlier. Genworth has written coverage on about 1.5 million loans in the country.
The mortgage insurers in Canada and Australia account for most of Genworth’s home-loan guarantee business outside the U.S., according to the company’s annual filing. Genworth sold a minority stake in the Canada mortgage insurer to raise more than $700 million in July 2009. Genworth MI Canada Inc. (MIC) trades at C$37.15 a share, compared with an offering price of C$19.
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