PetIQ, Inc. (“PetIQ”) (NasdaqGS: PETQ) today announced the
pricing of its offering of $125,000,000 aggregate principal amount
of 4.00% 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”). The issuance and sale of the notes are scheduled to
settle on May 19, 2020, subject to customary closing conditions.
PetIQ also granted 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 and will accrue interest at a rate of 4.00% per annum,
payable semi-annually in arrears on June 1 and December 1 of each
year, beginning on December 1, 2020. The notes will mature on June
1, 2026, unless earlier repurchased, redeemed or converted. Before
January 15, 2026, noteholders will have the right to convert their
notes only upon the occurrence of certain events. From and after
January 15, 2026, noteholders may convert their notes at any time
at their election until the close of business on the second
scheduled trading day immediately before the maturity date. 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
initial conversion rate is 33.7268 shares of Class A common stock
per $1,000 principal amount of notes, which represents an initial
conversion price of approximately $29.65 per share of Class A
common stock. The initial conversion price represents a premium of
approximately 25.0% over the last reported sale of $23.72 per share
of PetIQ’s Class A common stock on May 14, 2020. The conversion
rate and conversion price will be subject to adjustment upon the
occurrence of certain events.
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.
If a “fundamental change” (as defined in the
indenture for the notes) occurs, then, subject to a limited
exception, noteholders may require PetIQ to repurchase their notes
for cash. The repurchase price will be equal to the principal
amount of the notes to be repurchased, plus accrued and unpaid
interest, if any, to, but excluding, the applicable repurchase
date.
PetIQ estimates that the net proceeds from the
offering will be approximately $120.0 million (or approximately
$138.1 million if the initial purchasers fully exercise their
option to purchase additional notes), after deducting initial
purchasers’ discounts and commissions and estimated offering
expenses. PetIQ intends to loan the proceeds of the offering, after
deducting initial purchasers’ discounts and commissions and
approximately $12.9 million to fund 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 entered into privately negotiated capped call transactions
with one or more dealers, which included one or more financial
institutions (the "option counterparties"). The capped call
transactions will 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. The cap price of the capped
call transactions initially will be $41.51 per share, which price
represents a premium of 75.0% over the last reported sale of $23.72
per share of PetIQ’s Class A common stock on May 14, 2020. The cap
price will be subject to adjustment upon the occurrence of certain
events.
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
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 completion of the
offering, the expected amount and intended use of the net proceeds
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, the satisfaction of the closing conditions
related to the offering 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
offering described in this press release and, if the offering is
consummated, cannot provide any assurances regarding 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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