Brookfield Business Partners (BBU.UN-T) announced Monday morning it plans to purchase all outstanding shares of Genworth MI Canada, the country’s largest private sector residential mortgage insurer, in a deal which values the firm at about $3.8 billion.
Brookfield already owns a controlling 57 per cent share of Genworth, which recently rebranded and is now operating as Sagen MI Canada (MIC-T). Brookfield and a group of affiliates and institutional partners will pay $43.50 per share for the outstanding Genworth/Sagen units.
Buying the remaining units will cost about $1.6 billion, of which Brookfield will fund about $606 million and its affiliates and other investors the remainder.
Brookfield’s initial Genworth investment
“The transaction, together with our company’s recent rebranding as Sagen MI Canada, represents an exciting new chapter for the company,” said Stuart Levings, president and CEO of Genworth/Sagen, in the announcement. “We look forward under Brookfield’s ownership to continuing to work with lenders, regulators and mortgage professionals to help people responsibly achieve and maintain the dream of home ownership.”
The deal comes as Genworth’s stock price, like many others focused on the real estate sector, remained depressed amid the COVID-19 pandemic and related economic uncertainty. The stock closed at $35.58 on Friday on the TSX after trading as high as $60 in January.
“We are pleased to have reached this agreement, which will provide existing shareholders of the company with price certainty and a meaningful premium in an uncertain market environment,” said David Nowak, managing partner, Brookfield Business Partners, in the release.
Brookfield bought the 57 per cent controlling interest in August 2019 for about $2.4 billion. At the time, it paid $48.86 per share.
The purchase price represents a premium of approximately 22 per cent to the company’s closing share price Friday on the TSX and a premium of approximately 25 per cent to the 20-day volume weighted average price on that date.
Genworth rebrands to Sagen
Genworth MI Canada Inc. changed its brand from Genworth MI Canada to Sagen MI Canada as of Oct. 13. The company operates Genworth Financial Mortgage Insurance Company Canada, the largest private sector residential mortgage insurer in Canada.
It provides mortgage default insurance to Canadian residential mortgage lenders. As at Sept. 30, Genworth had $7.1 billion in total assets and $3.8 billion in shareholder equity.
Genworth is based in Oakville, just west of Toronto.
The transaction requires a number of approvals, including two thirds of Genworth/Sagen shareholders, as well as the approval by at least 50 per cent of minority shareholders (which excludes Brookfield). It is also subject to a series of court and governmental approvals.
The company expects to mail an information circular for a special meeting in November and to hold the special meeting in late December. The transaction is expected to close in the first half of 2021.
During this period, Genworth/Sagen will continue paying its quarterly dividend of $0.54 per share.
Scotiabank is acting as financial advisor to the special committee. Blake, Cassels & Graydon LLP is acting as legal advisor to the company and Goodmans LLP is acting as legal advisor to the special committee.
Torys LLP is acting as legal advisor to Brookfield. McCarthy Tétrault LLP is acting as legal advisor to Scotiabank.
About Brookfield Business Partners LP
Brookfield Business Partners L.P. is a business services and industrials company focused on owning and operating high-quality businesses that benefit from barriers to entry and/or low production costs.
Brookfield Business Partners is the flagship listed business services and industrials company of Brookfield Asset Management Inc. (BAM.A-T), a global alternative asset manager with approximately US$550 billion of assets under management.