Microchip Technology Announces Pricing of Offering of $1.1 Billion of Convertible Senior Notes
May 29 2024 - 11:00PM
(NASDAQ: MCHP) – Microchip Technology Incorporated, a leading
provider of smart, connected, and secure embedded control
solutions, today announced the pricing of $1.1 billion aggregate
principal amount of Convertible Senior Notes due 2030 (the “notes”)
in a private offering (the “offering”) only to persons reasonably
believed to be qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended (the “Securities
Act”). Microchip also granted the initial purchasers of the notes
an option to purchase, within a 13-day period beginning on, and
including, the date Microchip first issues the notes, up to an
additional $150 million aggregate principal amount of the
notes. The sale of the notes to the initial purchasers is expected
to settle on May 31, 2024, subject to customary closing conditions,
and is expected to result in approximately $1.09 billion in net
proceeds to Microchip after deducting the initial purchasers’
discounts and commissions and estimated offering expenses payable
by Microchip (assuming no exercise of the initial purchasers’
option to purchase additional notes).
The notes will be senior, unsecured obligations of Microchip.
The notes will bear interest at a rate of 0.75% per year. Interest
will be payable semi-annually in arrears on June 1 and December 1
of each year, beginning on December 1, 2024. The notes will mature
on June 1, 2030, unless earlier redeemed, repurchased or converted.
Microchip may not redeem the notes prior to June 5, 2027. Microchip
may redeem for cash all or any portion (subject to certain
limitations) of the notes, at its option, on or after June 5, 2027
and prior to the 21st scheduled trading day immediately preceding
the maturity date, if the last reported sale price of Microchip’s
common stock (“common stock”) has been at least 130% of the
conversion price then in effect for at least 20 trading days
(whether or not consecutive), including the trading day immediately
preceding the date on which Microchip provides notice of
redemption, during any 30 consecutive trading day period ending on
and including the trading day preceding the date on which Microchip
provides notice of redemption at a redemption price equal to 100%
of the principal amount of the notes to be redeemed, plus any
accrued and unpaid interest to, but excluding, the redemption date.
No sinking fund is provided for the notes, which means that
Microchip is not required to redeem or retire the notes
periodically.
Holders may require Microchip to repurchase the notes for cash
on June 1, 2027 at a purchase price equal to the principal
amount thereof plus accrued and unpaid interest. In addition,
holders of the notes will have the right to require Microchip to
repurchase all or a portion of their notes upon the occurrence of a
fundamental change (as defined in the indenture governing the
notes) at a purchase price of 100% of their principal amount plus
any accrued and unpaid interest. In connection with certain
corporate events or if Microchip calls any notes for redemption,
Microchip will, under certain circumstances, increase the
conversion rate for noteholders who elect to convert their notes in
connection with any of such corporate events or convert their notes
called for redemption.
The notes will be convertible at an initial conversion rate of
8.2076 shares of common stock per $1,000 principal amount of notes
(equivalent to an initial conversion price of approximately $121.84
per share, which represents a conversion premium of approximately
27.5% to the last reported sale price of $95.56 per share of the
common stock on The Nasdaq Global Select Market on May 29,
2024).
Prior to the close of business on the business day immediately
preceding March 1, 2030, the notes will be convertible at the
option of the noteholders only upon the satisfaction of specified
conditions and during certain periods. On or after March 1, 2030
until the close of business on the second scheduled trading day
preceding the maturity date, the notes will be convertible at the
option of the noteholders at any time regardless of these
conditions. Upon conversion, Microchip will pay cash up to the
aggregate principal amount of the notes to be converted and pay or
deliver, as the case may be, cash, shares of common stock or a
combination of cash and shares of common stock, at Microchip’s
election, in respect of the remainder, if any, of its conversion
obligation in excess of the aggregate principal amount of the notes
being converted.
In connection with the pricing of the notes, Microchip entered
into privately negotiated capped call transactions with certain
financial institutions (the “option counterparties”). The capped
call transactions will cover, subject to anti-dilution adjustments,
the number of shares of common stock underlying the notes sold in
the offering. The capped call transactions are generally expected
to reduce potential dilution to the common stock upon any
conversion of notes and/or offset any cash payments Microchip is
required make in excess of the principal amount of converted notes,
as the case may be, with such reduction and/or offset subject to a
cap. The cap price of the capped call transactions will initially
be $167.23 per share, which represents a premium of 75% over the
last reported sale price of the common stock of $95.56 per share on
The Nasdaq Global Select Market on May 29, 2024, and is subject to
certain adjustments under the terms of the capped call
transactions.
Microchip has been advised that, in connection with establishing
their initial hedges of the capped call transactions, the option
counterparties or their respective affiliates expect to purchase
shares of common stock and/or enter into various derivative
transactions with respect to the common stock concurrently with or
shortly after the pricing of the notes. This activity could
increase (or reduce the size of any decrease in) the market price
of the common stock or the notes at that time. In addition, the
option counterparties or their respective affiliates may modify
their hedge positions by entering into or unwinding various
derivatives with respect to the common stock and/or purchasing or
selling the common stock or other securities of Microchip in
secondary market transactions from time to time prior to the
maturity of the notes (and are likely to do so during any
observation period related to a conversion of the notes and, to the
extent Microchip unwinds a corresponding portion of the capped call
transactions, following any repurchase or redemption of the notes).
This activity could also cause or avoid an increase or a decrease
in the market price of the common stock or the notes, which could
affect the ability of noteholders to convert the notes and, to the
extent the activity occurs during any observation period related to
a conversion of notes, it could affect the number of shares and
value of the consideration that noteholders will receive upon
conversion of the notes.
Microchip intends to use $92.4 million of the net proceeds of
the offering to pay the cost of the capped call transactions
described above. If the initial purchasers exercise their option to
purchase additional notes, Microchip expects to use a portion of
the net proceeds from the sale of such additional notes to enter
into additional capped call transactions. Microchip intends to use
the remaining net proceeds to repay existing debt including notes
outstanding under Microchip’s commercial paper program.
The notes were and will only be offered to persons reasonably
believed to be qualified institutional buyers pursuant to Rule 144A
under the Securities Act. Neither the notes nor the shares of
common stock potentially issuable upon conversion of the notes, if
any, have been, or will be, registered under the Securities Act or
the securities laws of any other jurisdiction, and unless so
registered, may not be offered or sold in the United States except
pursuant to an applicable exemption from such registration
requirements.
This announcement is neither an offer to sell nor a solicitation
of an offer to buy any of these securities and shall not constitute
an offer, solicitation or sale in any jurisdiction in which such
offer, solicitation or sale is unlawful.
The Microchip logo and name are registered
trademarks of Microchip Technology Incorporated.
INVESTOR RELATIONS CONTACT:
Eric Bjornholt – CFO ... (480) 792-7804Sajid
Daudi – Head of Investor Relations ... (480) 792-7385
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