Lam Research Corporation Prices $750 Million of Convertible Notes
May 06 2011 - 8:45AM
Business Wire
Lam Research Corporation (NASDAQ: LRCX) today announced that it
has priced its private offering of $750 million in aggregate
principal amount of convertible senior notes, an increase from the
$700 million in aggregate principal amount previously announced.
The notes will be issued in two tranches of $375 million each (an
increase from $350 million each) due in May 2016 (the “2016 Notes”)
and May 2018 (the “2018 Notes,” and together with the 2016 Notes,
the “Notes”), respectively, and will be sold to qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended. The Notes will be senior unsecured obligations
of Lam Research. The 2016 Notes will bear interest at a rate of
0.50% per year, and the 2018 Notes will bear interest at a rate of
1.25% per year, in each case, payable semi-annually. The Notes will
each be convertible into cash and shares, if any, of Lam Research’s
common stock. The conversion rate for each of the 2016 Notes and
the 2018 Notes will initially be 15.8687 shares per $1,000
principal amount, which is equivalent to an initial conversion
price of approximately $63.02 per share of common stock. The
initial conversion price of the Notes represents a premium of
approximately 32.5% to the $47.56 per share closing price of Lam
Research’s common stock on May 5, 2011. The Notes will be
convertible prior to February 15, 2016 in the case of the 2016
Notes and prior to February 15, 2018 in the case of the 2018 Notes,
only upon the occurrence of certain circumstances, and will be
convertible thereafter regardless of these circumstances. Upon
conversion of the Notes, holders will receive cash up to the
principal amount of each Note converted, and any excess conversion
value above the principal amount of the Note will be delivered in
shares of Lam Research’s common stock. Lam Research has granted to
the initial purchasers the right to purchase an additional $75
million (an increase from $50 million) in aggregate principal
amount of each tranche to cover over-allotments. The sale of the
Notes is expected to close on May 11, 2011, subject to customary
closing conditions.
Lam Research estimates that the net proceeds from the offering
will be approximately $735,500,000, after deducting the initial
purchasers’ discounts and commissions and the estimated offering
expenses payable by Lam Research.
Lam Research intends to use a portion of the net proceeds of the
offering to repurchase approximately 1,000,000 shares of its common
stock from purchasers of Notes in privately negotiated transactions
effected through one of the initial purchasers. The price of the
common stock repurchased in such transactions will be $47.56 per
share, the closing price of Lam Research’s common stock on May 5,
2011. This activity could affect the market price of Lam Research
common stock concurrently with, or shortly after, the pricing of
the Notes, and could result in a higher effective conversion price
for the Notes. In addition, following this offering Lam Research
may from time to time repurchase additional shares of common stock
pursuant to its stock repurchase program. Any future repurchases
could affect the market price of Lam Research common stock or the
Notes.
In connection with the pricing of the Notes, Lam Research
entered into privately negotiated convertible note hedge and
warrant transactions with the initial purchasers or their
respective affiliates. Lam Research intends to use a portion of the
net proceeds to pay the cost of the convertible note hedge
transactions (taking into account the proceeds to it from the sale
of the warrants); the resulting net cost of these transactions to
Lam Research will be approximately $39,412,500. If the initial
purchasers exercise their over-allotment option with respect to a
series of Notes, Lam Research expects to sell additional warrants
and use a portion of the net proceeds from the sale of the
additional Notes, together with the proceeds from the additional
warrants, to enter into additional convertible note hedge
transactions.
The convertible note hedge transactions are expected to reduce
the potential dilution with respect to shares of Lam Research
common stock upon any conversion of the Notes; however, the warrant
transactions will have a dilutive effect with respect to Lam
Research common stock to the extent that the market price per share
of Lam Research common stock exceeds the applicable strike price of
the warrants, which, in the case of the warrants relating to the
convertible note hedge transactions for the 2016 Notes, is
approximately 50% higher than the closing price of Lam Research’s
common stock on May 5, 2011 and, in the case of the warrants
relating to the convertible note hedge transactions for the 2018
Notes, is approximately 60% higher than the closing price of Lam
Research’s common stock on May 5, 2011. In connection with the
convertible note hedge and warrant transactions, the initial
purchasers or their affiliates that are party to those transactions
have advised Lam Research that they expect to enter into various
derivative transactions with respect to Lam Research common stock.
This activity could increase (or reduce the size of any decrease
in) the market price of Lam Research common stock or the Notes
above market levels that would have prevailed or prevent or retard
a decline in the market price of Lam Research common stock or the
Notes. In addition, the initial purchasers or their affiliates that
are party to those transactions have advised Lam Research that they
may modify their hedge positions by entering into or unwinding
various derivatives with respect to Lam Research common stock
and/or purchasing or selling Lam Research common stock in secondary
market transactions following the pricing of the Notes and prior to
the maturity of the Notes (and are likely to do so during any
observation period related to a conversion of Notes). This activity
could also cause or avoid an increase or a decrease in the market
price of Lam Research common stock or the Notes, which could affect
holders’ ability to convert the Notes and, to the extent the
activity occurs during any observation period related to the Notes,
it could affect the number of shares and value of the consideration
that holders will receive upon conversion of the Notes.
The balance of the net proceeds of the offering is intended to
be used for general corporate purposes, including working capital
and capital expenditures. Lam Research may also use a portion of
the net proceeds to acquire other businesses, products or
technologies, or to repurchase shares of its common stock under its
share repurchase program. Lam Research does not have agreements or
commitments for any specific acquisition at this time.
This announcement does not constitute an offer to sell, or the
solicitation of an offer to buy, any of these securities. Any
offers of the Notes were and will be made only by means of a
confidential offering memorandum. The Notes, the convertible note
hedge transactions, the warrants and the shares of Lam Research
common stock underlying these securities have not been and will not
be registered under the Securities Act of 1933, as amended, or the
securities laws of any other jurisdiction and may not be offered or
sold in the United States without registration or an applicable
exemption from registration requirements.
Lam Research Corporation is a major provider of wafer
fabrication equipment and services to the world's semiconductor
industry. Lam's common stock trades on The NASDAQ Global Select
MarketSM under the symbol LRCX. Lam Research is a NASDAQ-100(R)
Company.
This release contains forward-looking statements and
projections. Forward-looking statements and projections can often
be identified by the use of forward-looking words such as “expect,”
“may,” “will,” “could,” “believe,” “anticipate,” “estimate,”
“continue,” “plan,” “intend,” “project” or other similar
expressions to identify such forward-looking statements. Undue
reliance should not be placed on such forward-looking statements
and projections, which speak only as of the date they are made. Lam
Research undertakes no obligation to update such forward-looking
statements. Actual events and results may differ materially from
those in the forward-looking statements and are subject to risks
and uncertainties. Such risks and uncertainties include, but are
not limited to, whether or not Lam Research will consummate the
offering, the anticipated use of the proceeds of the offering and
whether the convertible note hedge and warrant transactions will
become effective.
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