Genworth MI Canada Inc., now operating as Sagen MI Canada (TSX: MIC), has entered into a definitive arrangement agreement pursuant to which Brookfield Business Partners L.P. (NYSE: BBU; TSX: BBU.UN) together with certain of its affiliates and institutional partners will take the company private and acquire all of the outstanding common shares of Genworth MI Canada that are not already owned by Brookfield at CDN $43.50 per common share in cash pursuant to a court-approved plan of arrangement.
In December 2019, Brookfield Business Partners along with partners acquired all 48,944,645 common shares of Genworth MI Canada previously owned by Genworth Financial, Inc. (NYSE: GNW) and its subsidiaries, representing 57% controlling interest, at CDN $48.86 per share for approximately CDN $2.4 billion.
Genworth MI Canada currently has 86,291,079 common shares issued and outstanding. The transaction would value Genworth MI Canada at approximately CDN $3.75 billion or CDN $1.62 billion to the minority shareholders on a non-diluted basis, or CDN $3.79 billion and CDN $1.66 billion respectively on a fully-diluted basis.
The transaction is expected to close in the first half of 2021.
Scotia Capital Inc. is acting as financial advisor to the Genworth MI Canada’s Special Committee and as independent valuator of the Common Shares. Blake, Cassels & Graydon LLP is acting as legal advisor to Genworth MI Canada 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 Scotia Capital.
photo credit: Genworth MI Canada/Sagen MI Canada
Genworth MI Canada Inc. to be Acquired by Brookfield
Transaction Delivers Substantial Premium, Provides Certain Cash Value to Genworth MI Canada Inc. Shareholders
TORONTO, Oct. 26, 2020 /CNW/ – Genworth MI Canada Inc., now operating as Sagen MI CanadaTM (the “Company”) (TSX: MIC), today announced that it has entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Brookfield Business Partners L.P. (NYSE: BBU) (TSX: BBU.UN) together with certain of its affiliates and institutional partners (collectively, “Brookfield”) will purchase all of the outstanding common shares of the Company (the “Common Shares”) that are not already owned by Brookfield.
Under the terms of the Arrangement Agreement, Brookfield (which owns approximately 57% of the Common Shares) will purchase all of the Common Shares not held by it at a price of $43.50 per Common Share in cash pursuant to a court-approved plan of arrangement (the “Transaction”). The purchase price represents a premium of approximately 22% to the Company’s closing share price on the Toronto Stock Exchange on October 23, 2020, the last trading day prior to today’s announcement, and a premium of approximately 25% to the 20-day volume weighted average price on that date.
The Company’s board of directors, other than certain conflicted directors (the “Board”), unanimously approved the Arrangement Agreement following a unanimous recommendation of a special committee of independent directors (the “Special Committee”). Both the Special Committee and the Board determined that the Transaction is in the best interests of the Company and unanimously recommend that shareholders vote in favour of the Transaction at the special meeting of shareholders to be held to approve the Transaction (the “Special Meeting”).
The Special Committee’s independent financial advisor, Scotia Capital Inc. (“Scotiabank”), has provided an opinion to the Special Committee that, as of October 26, 2020, and subject to the assumptions, limitations and qualifications to be set out in a written formal valuation report, the fair market value of the Common Shares ranged between $43.00 and $48.00 per Common Share. Scotiabank has also provided an opinion to the Special Committee that, as of October 26, 2020, and subject to the assumptions, limitations and qualifications to be set out in a fairness opinion letter, the consideration to be received by the Company’s shareholders (other than Brookfield) is fair, from a financial point of view, to such shareholders.
Sidney Horn, Chair of the Special Committee, commented, “We have conducted, with the assistance of our independent financial and legal advisors, a thorough evaluation of Brookfield’s proposal and alternatives available to the Company to maximize shareholder value, while taking into consideration the interests of all of our stakeholders. We are pleased, after extensive negotiations, to have reached an agreement that provides shareholders of the Company other than Brookfield with a compelling purchase price and certain cash value.”
Stuart Levings, President and CEO, stated, “The Transaction, together with our Company’s recent rebranding as Sagen MI CanadaTM, represents an exciting new chapter for the Company. 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.”
“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.
The Transaction is to be implemented by way of and subject to a court-approved plan of arrangement under the Canada Business Corporations Act. Completion of the Transaction requires approval by two thirds of the votes cast by shareholders, as well as the approval by a simple majority of votes cast by minority shareholders (which excludes Brookfield) present (or represented by proxy) at the Special Meeting. Each of the directors of the Company (other than those associated with Brookfield) and certain officers of the Company have also entered into voting support agreements, pursuant to which, among other things, such persons have agreed to vote their Common Shares in favour of the Transaction. The Transaction is also subject to court approval, approval by the federal Minister of Finance, and the satisfaction of other customary closing conditions. The Company expects to mail an information circular for the Special Meeting in November 2020, and to hold the Special Meeting in late December 2020. The Transaction is expected to close in the first half of 2021.
The Company is permitted to continue paying its regular quarterly cash dividend of $0.54 per Common Share, consistent with its dividend policy and past practice, until closing of the Transaction.
Following closing, the Company intends to continue to satisfy the public float requirement of the Insurance Companies Act (Canada) through the issuance of a new class of publicly-traded voting preferred shares of the Company, which preferred shares are intended to be issued prior to or concurrently with closing of the Transaction. A special resolution of shareholders to create this new class of voting preferred shares will be presented to Company shareholders for approval at the Special Meeting.
Further details regarding the terms and conditions of the Transaction are set out in the Arrangement Agreement, which will be publicly filed by the Company under its profile at www.sedar.com. Additional information regarding the terms of the Arrangement Agreement, the background to the Transaction and the independent valuation and fairness opinion will be provided in the information circular for the special meeting of shareholders, which will also be filed at www.sedar.com.
Scotiabank is acting as financial advisor to the Special Committee and as independent valuator of the Common Shares. 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.
The Company’s public filings are available at www.sedar.com and on the Investor Relations page of the Company’s website at https://investor.sagen.ca/English/financials-and-filings/.
About Genworth MI Canada Inc.
Genworth MI Canada Inc. (TSX: MIC) changed its brand from Genworth MI CanadaTM to Sagen MI CanadaTM effective October 13th, 2020. The Company, operating through its subsidiary, Genworth Financial Mortgage Insurance Company Canada, is the largest private sector residential mortgage insurer in Canada. The Company provides mortgage default insurance to Canadian residential mortgage lenders, making homeownership more accessible to first-time homebuyers. The Company differentiates itself through customer service excellence, innovative processing technology, and a robust risk management framework. For more than two decades, the Company has supported the housing market by providing thought leadership and a focus on the safety and soundness of the mortgage finance system. As at September 30th, 2020, the Company had $7.1 billion total assets and $3.8 billion shareholders’ equity. Find out more at www.sagen.ca.
Genworth Canada’s head office is located at 2060 Winston Park Drive, Suite 300, Oakville, ON L6H 5R7.
About Brookfield Business Partners L.P.
Brookfield Business Partners L.P. (NSYE: BBU) (TSX: BBU.UN) 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. (NYSE: BAM) (TSX: BAM.A), a leading global alternative asset manager with approximately US$550 billion of assets under management. More information is available at www.brookfield.com.
Brookfield Business Partners L.P. is listed on the New York and Toronto stock exchanges. Important information may be disseminated exclusively via the website; investors should go to https://bbu.brookfield.com to access this information.
Required Early Warning Reporting
The Common Shares to be acquired by Brookfield pursuant to the Transaction will be purchased by a wholly-owned subsidiary of Falcon Holding LP, an affiliate of Brookfield Business Partners L.P, for aggregate consideration of approximately C$1.6 billion. As of the date of this press release, Falcon Holding LP holds 48,944,645 Common Shares representing approximately 57% of the issued and outstanding Common Shares.
Upon closing of the Transaction, Brookfield intends to cause the Common Shares to cease to be listed on the Toronto Stock Exchange. An amended early warning report will be filed by Brookfield with applicable Canadian securities regulatory authorities. To obtain copies of the early warning report, please contact Alan Fleming, Brookfield Business Partners, 416-645-2736.
The head office of Falcon Holding LP is located at Brookfield Place, 181 Bay Street, Suite 300, Toronto, Ontario, M5J 2T3.
Caution regarding forward-looking information and statements
Certain statements made in this news release contain forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). When used in this news release, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “seek”, “propose”, “estimate”, “expect”, and similar expressions, as they relate to the Company are intended to identify forward-looking statements. Specific forward-looking statements in this document include, but are not limited to, statements with respect to the timing of various steps to be completed in connection with the Transaction (including the mailing of the information circular, the holding of the Special Meeting, the special resolution of shareholders to create a new class of voting preferred shares of the Company and potential issuances of such voting preferred shares), the Company’s operational focuses, the payment of dividends in the future and other statements that are not material facts.
The forward-looking statements contained herein are based on certain factors and assumptions, certain of which appear proximate to the applicable forward-looking statements contained herein. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors beyond the Company’s ability to control or predict, that may cause the actual results, performance or achievements of the Company, or developments in the Company’s business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Actual results or developments may differ materially from those contemplated by the forward-looking statements.
The Company’s actual results and performance could differ materially from those anticipated in these forward-looking statements as a result of both known and unknown risks, including: (i) the possibility that the Transaction will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required shareholder and regulatory approvals and other conditions of closing necessary to complete the Transaction or for other reasons; (ii) the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the Transaction; (iii) risks relating to the Company’s ability to retain and attract key personnel during the interim period; (iv) the possibility of litigation relating to the Transaction; (v) credit, market, currency, operational, liquidity and funding risks generally and relating specifically to the Transaction, including changes in economic conditions, interest rates or unemployment rates; (vi) risks and uncertainties relating to information management, technology, changes in law, competition and seasonality; and (viii) other risks inherent to the Company’s business and/or factors beyond its control which could have a material adverse effect on the Company or the ability to consummate the Transaction.
This is not an exhaustive list of the factors that may affect any of the Company’s forward-looking statements. Some of these and other factors are discussed in more detail in the Company’s Annual Information Form (the “AIF”) dated March 11th, 2020. Investors and others should carefully consider these and other factors and not place undue reliance on the forward-looking statements. Further information regarding these and other risk factors is included in the Company’s public filings with provincial and territorial securities regulatory authorities (including the Company’s AIF) and can be found on SEDAR and available at www.sedar.com. The forward-looking statements contained in this news release represent the Company’s views only as of the date hereof. Forward-looking statements contained in this news release are based on management’s current plans, estimates, projections, beliefs and opinions and the assumptions related to these plans, estimates, projections, beliefs and opinions may change, and are presented for the purpose of assisting the Company’s security holders in understanding management’s current views regarding those future outcomes and may not be appropriate for other purposes. While the Company anticipates that subsequent events and developments may cause the Company’s views to change, the Company does not undertake to update any forward-looking statements, except to the extent required by applicable securities laws.
SOURCE Genworth MI Canada
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