PetIQ, Inc. Announces Proposed Convertible Senior Notes Offering to Fund Capstar Acquisition
May 14 2020 - 8:03AM
PetIQ, Inc. (“PetIQ”) (NasdaqGS: PETQ) today announced its
intention to offer, subject to market and other conditions,
$125,000,000 aggregate principal amount of convertible senior notes
due 2026 (the “notes”) in a private offering to qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Securities Act”). PetIQ also expects to
grant the initial purchasers of the notes a 30-day option to
purchase up to an additional $18,750,000 principal amount of notes.
The notes will be senior, unsecured obligations
of PetIQ, will accrue interest payable semi-annually in arrears and
will mature on June 1, 2026, unless earlier repurchased, redeemed
or converted. Noteholders will have the right to convert their
notes in certain circumstances and during specified periods. PetIQ
will settle conversions by paying or delivering, as applicable,
cash, shares of its Class A common stock or a combination of cash
and shares of its Class A common stock, at PetIQ’s election. The
notes will be redeemable, in whole or in part, for cash at PetIQ’s
option at any time, and from time to time, on or after June 1, 2023
and on or before the 40th scheduled trading day immediately before
the maturity date, but only if the last reported sale price per
share of PetIQ’s Class A common stock exceeds 130% of the
conversion price for a specified period of time. The redemption
price will be equal to the principal amount of the notes to be
redeemed, plus accrued and unpaid interest, if any, to, but
excluding, the redemption date. The interest rate, initial
conversion rate and other terms of the notes will be determined at
the pricing of the offering.
PetIQ intends to loan the proceeds of the
offering, after deducting the initial purchasers’ discounts and
commissions and the cost of entering into the capped call
transactions described below, to PetIQ Holdings, LLC (“Holdco”).
PetIQ intends to cause Holdco to use the remaining proceeds to pay
its offering expenses, to fund PetIQ’s previously announced
acquisition of the Capstar® portfolio from Elanco Animal Health,
Inc. and related fees and expenses, and for working capital and
other general corporate purposes. If the initial purchasers
exercise their option to purchase additional notes, then PetIQ
intends to use a portion of the additional proceeds to fund the
cost of entering into additional capped call transactions as
described below.
In connection with the pricing of the notes,
PetIQ expects to enter into privately negotiated capped call
transactions with one or more dealers, which may include certain
initial purchasers or their affiliates and/or one or more financial
institutions (the "option counterparties"). The capped call
transactions are expected to cover, subject to anti-dilution
adjustments substantially similar to those applicable to the notes,
the number of shares of PetIQ’s Class A common stock underlying the
notes. If the initial purchasers exercise their option to purchase
additional notes, PetIQ expects to enter into additional capped
call transactions with the option counterparties.
The capped call transactions are expected
generally to reduce the potential dilution to PetIQ's Class A
common stock upon any conversion of the notes and/or offset any
potential cash payments PetIQ is required to make in excess of the
principal amount of converted notes, as the case may be, upon any
conversion of the notes. However, if the market price per share of
PetIQ's Class A common stock, as measured under the terms of the
capped call transactions, exceeds the cap price of the capped call
transactions, there would nevertheless be dilution and/or there
would not be an offset of such potential cash payments, in each
case, to the extent that such market price exceeds the cap price of
the capped call transactions.
In connection with establishing their initial
hedges of the capped call transactions, the option counterparties
or their respective affiliates expect to enter into various
derivative transactions with respect to PetIQ's Class A common
stock and/or purchase shares of PetIQ's Class A 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 PetIQ's Class A 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 PetIQ's Class
A common stock and/or purchasing or selling PetIQ's Class A common
stock or other securities 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 affect
the market price of PetIQ's Class A common stock or the notes,
which could affect the ability of noteholders to convert the notes,
and, to the extent the activity occurs following conversion or
during any observation period related to a conversion of notes, it
could affect the number of shares of PetIQ Class A common stock and
the value of the consideration that noteholders would receive upon
conversion of the notes.
The offer and sale of the notes and any shares
of Class A common stock issuable upon conversion of the notes have
not been, and will not be, registered under the Securities Act or
any other securities laws, and the notes and any such shares cannot
be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and any other applicable securities laws. This press
release does not constitute an offer to sell, or the solicitation
of an offer to buy, the notes or any shares of Class A common stock
issuable upon conversion of the notes, nor will there be any sale
of the notes or any such shares, in any state or other jurisdiction
in which such offer, sale or solicitation would be unlawful.
About PetIQ
PetIQ is a leading pet medication and
wellness company delivering a smarter way for pet parents to help
their pets live their best lives through convenient access to
affordable veterinary products and services. PetIQ engages
with customers through more than 60,000 points of distribution
across retail and e-commerce channels with its branded distributed
medications, which are further supported by its own world-class
medications manufacturing facility in Omaha, Nebraska. PetIQ’s
national service platform, VIP Petcare, operates in over 3,400
retail partner locations in 41 states providing cost-effective and
convenient veterinary wellness services. PetIQ believes
that pets are an important part of the family and deserve the best
products and care we can give them.
Forward-Looking Statements
This press release includes forward-looking
statements, including statements regarding the anticipated terms of
the notes being offered, the completion, timing and size of the
proposed offering, the intended use of the proceeds and the
anticipated terms of, and the effects of entering into, the capped
call transactions described above. Forward-looking statements
represent PetIQ’s current expectations regarding future events and
are subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from those implied by the
forward-looking statements. Among those risks and uncertainties are
market conditions, including market interest rates, the trading
price and volatility of PetIQ’s Class A common stock and risks
relating to PetIQ’s business, including the impact of COVID-19 on
PetIQ’s business and the global economy and the risks set forth
under the heading “Risk Factors” in PetIQ’s Annual Report on Form
10-K for the year ended December 31, 2019, Quarterly Report on Form
10-Q for the quarter ended March 31, 2020 and other reports filed
from time to time with the Securities and Exchange
Commission. PetIQ may not consummate the proposed offering
described in this press release and, if the proposed offering is
consummated, cannot provide any assurances regarding the final
terms of the offer or the notes or its ability to effectively apply
the net proceeds as described above. The forward-looking statements
included in this press release speak only as of the date of this
press release, and PetIQ does not undertake to update the
statements included in this press release for subsequent
developments, except as may be required by law.
Contact:
Investor Relations Contact: |
Media Relations Contact: |
ICR Jeff
Sonnek 646-277-1263 jeff.sonnek@icrinc.com |
ICR Cory
Ziskind 646-277-1232 cory.ziskind@icrinc.com |
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