Progress Software Corporation (NASDAQ: PRGS) (“Progress”) today
announced the pricing of its private offering of $400.0 million
aggregate principal amount of 3.50% Convertible Senior Notes due
2030 (the “Notes”) to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Securities Act”). Progress also granted
the initial purchasers of the Notes an option to purchase up to an
additional $50.0 million aggregate principal amount of the Notes,
for settlement within a 13-day period beginning on, and including,
the first date on which the Notes are issued, solely to cover
overallotments. The aggregate principal amount of the offering was
increased from the previously announced offering size of $350.0
million (or $402.5 million if the initial purchasers exercise their
option to purchase additional notes in full). The offering of the
Notes is expected to close on March 1, 2024, subject to customary
closing conditions.
The Notes will be Progress’ senior unsecured obligations and
will mature on March 1, 2030, unless earlier converted, redeemed or
repurchased. The Notes will bear interest at a rate of 3.50% per
year, payable semi-annually in arrears on March 1 and September 1,
of each year, beginning on September 1, 2024. Before November
1, 2029, Noteholders will have the right to convert their Notes
only upon the occurrence of certain events. From and
after November 1, 2029, 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.
Progress will satisfy its conversion obligations by paying cash up
to the aggregate principal amount of Notes to be converted and pay
or deliver, as the case may be, cash, shares of its common stock or
a combination of cash and shares of its common stock, at its
election, in respect of the remainder. The initial conversion rate
is 14.7622 shares of common stock per $1,000 principal
amount of Notes, which represents an initial conversion price of
approximately $67.74 per share of common stock. The initial
conversion price represents a premium of approximately 27.50% over
the last reported sale price of $53.13 per share of Progress’
common stock on February 27, 2024. The conversion rate and
conversion price will be subject to adjustment upon the occurrence
of certain events. In addition, upon certain corporate events or
upon a notice of redemption (as described below), Progress will,
under certain circumstances, increase the conversion rate for
Noteholders who convert Notes in connection with such a corporate
event or notice of redemption.
The Notes will not be redeemable before March 5, 2027. The
Notes will be redeemable, in whole or in part, for cash at
Progress’ option at any time, and from time to time, on or
after March 5, 2027 and on or before the 60th scheduled
trading day immediately before the maturity date, but only if the
last reported sale price per share of Progress’ 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 to, but
excluding, the redemption date.
If a “fundamental change” (as will be defined in the indenture
for the Notes) occurs, then, subject to a limited exception,
Noteholders may require Progress 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 to,
but excluding, the applicable repurchase date.
Progress estimates that the net proceeds from the offering will
be approximately $389.3 million (or $438.1 million if the initial
purchasers exercise their option to purchase additional notes in
full) after deducting the initial purchasers’ discount and
commissions and estimated offering expenses payable by it.
Progress intends to use the net proceeds from the offering (i)
to repay amounts outstanding under its term loan credit facility,
(ii) to fund the approximate $37.5 million cost of entering into
the capped call transactions described below, (iii) to repurchase
approximately 470,544 shares of its common stock, using
approximately $25.0 million of the net proceeds from the offering,
pursuant to its existing share repurchase program concurrently with
the pricing of the offering in privately negotiated transactions
effected through one or more of the initial purchasers or their
affiliates, at a price per share equal to $53.13, the last reported
sale price per share of Progress’ common stock on February 27, 2024
and (iv) for general corporate purposes, which may include
repayment of other indebtedness.
In connection with the pricing of the Notes, Progress entered
into privately negotiated capped call transactions with one or more
of the initial purchasers and/or their respective affiliates and/or
other 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 common stock initially underlying the
Notes. If the initial purchasers exercise their option to purchase
additional Notes, then Progress 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 Progress’ common stock upon any conversion of the Notes
and/or offset any potential cash payments Progress is required to
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
approximately $92.98, which represents a premium of approximately
75.00% over the last reported sale price of Progress’ common stock
of $53.13 per share on February 27, 2024, and is subject to certain
adjustments under the terms 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 purchase shares of Progress’ common
stock and/or enter into various derivative transactions with
respect to Progress’ 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 Progress’
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 Progress’ common stock and/or purchasing or selling
Progress’ common stock or other securities issued by Progress in
secondary market transactions following the pricing of the Notes
and prior to the maturity of the Notes (and (x) are likely to do so
during any observation period related to a conversion of the Notes,
following any redemption of the Notes by Progress or following any
repurchase of the Notes by Progress in connection with any
fundamental change and (y) are likely to do so following any
repurchase of the Notes by Progress other than in connection with
any such redemption or any such fundamental change if Progress
elects to unwind a corresponding portion of the capped call
transactions in connection with such repurchase). This activity
could also cause or avoid an increase or a decrease in the market
price of Progress’ common stock or the Notes, which could affect a
Noteholder’s ability to convert the Notes and, to the extent the
activity occurs during any observation period related to a
conversion of the Notes, it could affect the number of shares of
Progress’ common stock and value of the consideration that a
Noteholder will receive upon conversion of the Notes.
In addition, if any such capped call transaction fails to become
effective, whether or not the offering of the Notes is completed,
the option counterparty party thereto may unwind its hedge
positions with respect to Progress’ common stock, which could
adversely affect the value of Progress’ common stock and, if the
Notes have been issued, the value of the Notes.
The concurrent repurchases of shares of Progress’ common stock
described above may have resulted in the common stock trading at
prices that are higher than would be the case in the absence of
these repurchases, which may have resulted in a higher initial
conversion price for the Notes Progress is offering.
The Notes will be offered and sold only to persons reasonably
believed to be qualified institutional buyers pursuant to Rule 144A
under the Securities Act. The Notes and any shares of Progress’
common stock issuable upon conversion of the Notes have not been
registered under the Securities Act, or any state securities law,
and the Notes and any such shares may not be offered or sold in the
United States or to any U.S. persons absent registration under, or
pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy the Notes or any shares of
Progress’ common stock issuable upon conversion of the Notes, nor
shall there be any offer, solicitation or sale of any Notes or any
such shares of Progress’ common stock issuable upon conversion of
the Notes in any jurisdiction in which such offer, solicitation or
sale would be unlawful.
About ProgressProgress provides enterprise
software products for the development, deployment and management of
high-impact business applications. With Progress, businesses can
automate and optimize the process by which applications are
developed, deployed and managed, making critical data and content
more accessible and secure and technology teams more
productive.
Progress and Progress Software are trademarks or registered
trademarks of Progress Software Corporation and/or its subsidiaries
or affiliates in the U.S. and other countries. Any other names
contained herein may be trademarks of their respective owners.
Forward-Looking StatementsThis
press release contains statements that are “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Progress has identified some of these
forward-looking statements with words like “believes,” “expects,”
“may,” “could,” “would,” “might,” “will,” “should,” “seeks,”
“intends,” “plans,” “estimates,” “targets,” or “anticipates,” or
similar expressions which concern our strategy, plans, projections
or intentions. Forward looking statements in this press release
include, but are not limited to, statements regarding the
completion, timing and size of the proposed offering, the intended
use of proceeds, the terms of the Notes being offered, the
anticipated terms of, and the effects of entering into, the capped
call transactions and the actions of the option counterparties and
their respective affiliates. By their nature, forward-looking
statements: speak only as of the date they are made; are not
statements of historical fact or guarantees of future performance;
and are subject to risks, uncertainties, assumptions, or changes in
circumstances that are difficult to predict or quantify. Our
expectations, beliefs, and projections are expressed in good faith
and we believe there is a reasonable basis for them. However, there
can be no assurance that management’s expectations, beliefs and
projections will result or be achieved and actual results may vary
materially from what is expressed in or indicated by the
forward-looking statements. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions,
including those described under the “Risk Factors” section of our
Annual Report on Form 10-K for the fiscal year ended November 30,
2023. Among those risks and uncertainties are market conditions,
including market interest rates, the trading price and volatility
of Progress’ common stock and risks relating to Progress’ business.
Progress may not consummate the proposed offering described in this
press release, and, if the proposed offering is consummated,
Progress cannot provide any assurances regarding the final terms of
the offering or the Notes or its ability to effectively apply the
net proceeds as described above. Except as required by law,
Progress has no obligation to update any of these forward-looking
statements to conform these statements to actual results or revised
expectations, which speak only as of the date of this press
release.
Investor
Contact: |
|
Press
Contact: |
Michael Micciche |
|
Erica McShane |
Progress Software |
|
Progress Software |
+1 781 850 8450 |
|
+1 781 280 4000 |
Investor-Relations@progress.com |
|
PR@progress.com |
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