SANTA CLARA, Calif.,
July 10, 2018 /PRNewswire/
-- Palo Alto Networks® (NYSE: PANW) announced today
the pricing of $1.5 billion aggregate
principal amount of convertible senior notes due 2023 (the "notes")
in a private placement to qualified institutional buyers pursuant
to Rule 144A under the Securities Act of 1933, as amended (the
"Act"). Palo Alto Networks also granted the initial
purchasers of the notes a 30-day option to purchase up to an
additional $225 million aggregate
principal amount of the notes, to cover over-allotments, if
any. The sale of the notes to the initial purchasers is
expected to settle on July 12, 2018,
subject to customary closing conditions, and is expected to result
in $1.48 billion in net proceeds to
Palo Alto Networks after deducting fees and estimated offering
expenses payable by Palo Alto Networks (assuming no exercise of the
initial purchasers' over-allotment option).
The notes will be senior, unsecured obligations of Palo Alto
Networks. The notes will bear interest at a rate of 0.75% per
year. Interest will be payable semi-annually in arrears on
January 1 and July 1 of each year, beginning on January 1, 2019. The notes will mature on
July 1, 2023, unless earlier
repurchased or converted. Palo Alto Networks may not redeem
the notes prior to maturity.
Palo Alto Networks expects to use $165.3
million of the net proceeds of the offering of the notes to
pay the cost of the convertible note hedge transactions described
below (after such cost is partially offset by the proceeds to Palo
Alto Networks of the warrant transactions described below) to raise
the effective conversion price of the notes from Palo Alto
Networks' perspective, and to use the remaining proceeds of the
offering for general corporate purposes, which may include working
capital, capital expenditures, potential acquisitions, strategic
transactions, the payment of amounts due upon conversion, at
maturity or upon repurchase of Palo Alto Networks' outstanding 0%
Convertible Senior Notes due 2019 and repurchases of Common Stock
pursuant to Palo Alto Networks' stock repurchase program.
Palo Alto Networks, however, does not currently have any
agreements or understandings with respect to any such material
acquisitions or strategic transactions.
The initial conversion rate for the notes is 3.7545 shares of
Palo Alto Networks' common stock (the "Common Stock") per
$1,000 principal amount of notes
(which is equivalent to an initial conversion price of
approximately $266.35 per share of
Common Stock). Prior to the close of business on the business
day immediately preceding April 1,
2023, the notes will be convertible at the option of the
noteholders only upon the satisfaction of specified conditions and
during certain periods as set forth in the indenture for the
notes. Thereafter, 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. Conversions of the notes will
be settled in cash up to the aggregate principal amount of the
notes to be converted and cash, shares of Common Stock or a
combination thereof, at Palo Alto Networks' election, in respect of
the remainder, if any, of Palo Alto Networks' conversion obligation
in excess of the aggregate principal amount of the notes being
converted. The last reported sale price of the Common Stock
on July 9, 2018 was $208.90 per share.
In connection with the pricing of the notes, Palo Alto Networks
entered into privately negotiated convertible note hedge
transactions with certain of the initial purchasers or their
respective affiliates or other financial counterparties (the "hedge
counterparties"). The convertible note hedge transactions are
expected generally to reduce the potential dilution to the Common
Stock upon any conversion of notes and/or offset the cash payments
Palo Alto Networks is required to make in excess of the principal
amount of converted notes, as the case may be, in the event that
the market price of the Common Stock is greater than the strike
price of the convertible note hedge transactions, which initially
corresponds to the initial conversion price of the notes.
Palo Alto Networks also entered into privately negotiated
warrant transactions with the hedge counterparties. The
warrant transactions could separately have a dilutive effect if the
market price of the Common Stock exceeds the strike price of the
warrant transactions, unless Palo Alto Networks elects, subject to
certain conditions, to settle the warrant transactions in cash.
The strike price of the warrant transactions will initially
be $417.80 per share, which
represents a premium of 100% over the last reported sale price of
the Common Stock on July 9, 2018, and
is subject to certain adjustments under the terms of the warrant
transactions. If the initial purchasers exercise their
over-allotment option, Palo Alto Networks intends to enter into
additional convertible note hedge transactions and additional
warrant transactions with the hedge counterparties.
Palo Alto Networks expects that, in connection with establishing
their initial hedge of the convertible note hedge transactions and
warrant transactions, the hedge counterparties and/or their
respective affiliates may enter into various derivative
transactions with respect to the Common Stock and/or purchase
shares of the Common Stock in privately negotiated transactions
and/or open market transactions concurrently with, or shortly
after, the pricing of the notes. These activities could have
the effect of increasing, or preventing a decline (or reducing the
size of any decline) in, the market price of the Common Stock at
that time. In addition, Palo Alto Networks expects that the
hedge counterparties and/or their respective affiliates may modify
their hedge positions from time to time following the pricing of
the notes and prior to the maturity of the notes (and are
particularly likely to do so during any observation period relating
to a conversion of the notes) by entering into or unwinding
derivative transactions with respect to the Common Stock and/or by
purchasing or selling shares of the Common Stock or other
securities of Palo Alto Networks in secondary market transactions.
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 the notes, could affect the
amount and value of the consideration that noteholders will receive
upon conversion of the notes. The convertible note hedge
transactions and warrant transactions have not been, and will not
be, registered under the Act 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.
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 notes and the
shares of Common Stock issuable upon conversion of the notes, if
any, have not been, and will not be, registered under the Act or
any state securities laws, and unless so registered, may not be
offered or sold in the United
States except pursuant to an exemption from the registration
requirements of the Act and applicable state laws.
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SOURCE Palo Alto Networks, Inc.