Brookfield Business Partners L.P. has announced an agreement to acquire an aggregate of 48,944,645 common shares of Genworth MI Canada Inc. The shares represent an approximate 57 per cent controlling interest in the business, from Genworth Financial, Inc. for approximately $2.4 billion or $48.86 per share.
Through its subsidiary Genworth Financial Mortgage Insurance Company Canada, Genworth Canada is the country’s largest private sector residential mortgage insurer that provides default insurance to Canadian residential mortgage lenders.
“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.”
Genworth Canada’s high-performing business serves an important role in supporting the stability of Canada’s housing market.
Canadian financial institutions are required to purchase mortgage insurance when residential mortgage down payments represent fewer than 20 per cent of the purchase price, according to Brookfield.
The mortgage company operates in a highly regulated industry with strict capital adequacy requirements. Brookfield states that the business has a long-term track record of generating consistent earnings and attractive returns on capital.
Brookfield Business Partners intends to fund approximately $700 million of the purchase on closing and for certain institutional partners to co-invest alongside it for the balance.
Brookfield Business Partners has also agreed to provide Genworth Financial, Inc. with a bridge loan of up to $850 million that is to be repaid from proceeds of the sale of its interest in Genworth Canada.
Closing of the transaction is subject to customary approvals, including the approval of the Minister of Finance (Canada), which is expected to occur in the second half of 2019.