Shares of long-term care insurer Genworth Financial (NYSE: GNW) are soaring on Monday. As of 10:30 a.m. EDT, the stock is up by a staggering 26% to its highest level since mid-2016.
Genworth had previously agreed to be acquired by China Oceanwide Holdings Group, but it was uncertain whether regulators would allow the deal to go through. On Saturday, the two companies said that the Committee on Foreign Investment in the United States (CFIUS), which examines proposed deals that would give foreign companies control of U.S. businesses, has decided not to block the deal.
In a nutshell, while there are still some regulatory hurdles the deal will need to overcome, this was the big one that had investors worried.
Genworth’s proposed sale to China Oceanwide Holdings Group has been delayed several times. The sale was originally announced in October 2016, and the deadline has been extended several times due to government regulation issues.
Investors are so excited about today’s news because the proposed acquisition price for Genworth is $5.43 per share, a massive 43% premium over Friday’s closing price. At times, the deal premium has reached more than 100%, indicating that the market hasn’t been terribly optimistic that the acquisition would ever close.
Genworth’s new share price (about $4.80 as of 10:30 a.m. EDT on Monday) means that once the deal is finalized, investors will get a premium of about 13% for their shares. This is a much narrower premium than we’ve seen in the time since the deal has been announced, so it’s fair to say that investors have become much more confident that Genworth will be sold.
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