Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, announced
today the pricing of $190.0 million aggregate principal amount of
1.50% convertible senior notes due 2028 (the “notes”) in a private
offering (the “offering”) only to persons reasonably believed to be
qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”). In
connection with the offering, Cerence granted the initial
purchasers an option to purchase up to an additional $20.0 million
aggregate principal amount of notes. The sale of the notes to the
initial purchasers is expected to close on June 26, 2023, subject
to customary closing conditions.
The notes will bear interest at a rate of 1.50% per
year, payable semi-annually in arrears on January 1 and July 1 of
each year, beginning January 1, 2024. The notes will mature on July
1, 2028, unless earlier converted, redeemed or repurchased. Prior
to April 3, 2028, the notes will be convertible only upon
satisfaction of certain conditions and during certain periods. On
or after April 3, 2028, the notes will be convertible at any time
until the close of business on the second scheduled trading day
immediately preceding the maturity date.
Cerence may not redeem the notes prior to July 6,
2026. On or after July 6, 2026 and on or before the 31st scheduled
trading day immediately before the maturity date, Cerence may
redeem for cash all or any portion of the notes (subject to certain
limitations) if the last reported sale price of Cerence’s common
stock has been at least 130% of the conversion price then in effect
for at least 20 trading days (whether or not consecutive),
including the trading day immediately preceding the date on which
Cerence provides notice of redemption, during any 30 consecutive
trading day period ending on, and including, the trading day
immediately preceding the date on which Cerence provides notice of
redemption. The redemption price will equal 100% of the principal
amount of the notes being redeemed, plus accrued and unpaid
interest to, but excluding, the redemption date. No sinking fund is
provided for the notes.
The notes will be convertible at the option of
holders, subject to certain conditions and during certain periods,
into cash, shares of Cerence’s common stock or a combination of
cash and shares of Cerence’s common stock, with the form of
consideration determined at Cerence’s election. Holders of the
notes will have the right to require Cerence to repurchase all or a
portion of their notes at 100% of their principal amount, plus any
accrued and unpaid interest, upon the occurrence of certain events.
The conversion rate will initially be 24.5586 shares of Cerence’s
common stock per $1,000 principal amount of notes (which is
equivalent to an initial conversion price of approximately $40.72
per share of Cerence’s common stock). The initial conversion price
of the notes represents a premium of approximately 22.5% over the
last reported sale price of Cerence’s common stock of $33.24 per
share on June 21, 2023.
When issued, the notes will be Cerence’s senior
unsecured obligations and will rank senior in right of payment to
any of Cerence’s indebtedness that is expressly subordinated in
right of payment to the notes; equal in right of payment to any of
Cerence’s liabilities that are not so subordinated; effectively
junior in right of payment to any of Cerence’s secured indebtedness
to the extent of the value of the assets securing such
indebtedness; and structurally junior to all indebtedness and other
liabilities (including trade payables) of Cerence’s
subsidiaries.
Cerence estimates that the net proceeds from the
offering of notes will be approximately $184.1 million (or
approximately $203.6 million if the initial purchasers exercise
their option to purchase additional notes in full), after deducting
the initial purchasers’ discounts and estimated offering expenses
payable by Cerence.
Cerence intends to use approximately $102.0 million
of the net proceeds from the offering to finance the concurrent
repurchase of a portion of its 3.00% convertible senior notes due
2025 (the “2025 notes”) as described below. Cerence intends to use
the remaining net proceeds from the offering, together with up to
approximately $24.7 million that Cerence will borrow under its
revolving credit facility to the extent the initial purchasers do
not exercise their option to purchase additional notes in full, to
repay approximately $106.8 million under its term loan facility,
which amount constitutes all of the borrowings and accrued and
unpaid interest thereunder. Cerence intends to use the additional
remaining net proceeds from the offering, if any, for general
corporate purposes.
Contemporaneously with the pricing of the notes in
the offering, Cerence entered into individual privately negotiated
transactions with certain holders of the 2025 notes, which were
effected through one of the initial purchasers or its affiliate
acting as Cerence’s agent, to repurchase $87.5 million in aggregate
principal amount of the 2025 notes for approximately $102.0 million
in cash (each a “note repurchase” and collectively the “2025 notes
repurchases”), which amount includes accrued and unpaid interest on
the 2025 notes to be repurchased.
Cerence expects that holders of 2025 notes who
agreed to participate in the 2025 notes repurchases and who have
hedged their equity price risk with respect to the 2025 notes may
enter into or unwind various derivatives with respect to Cerence’s
common stock and/or purchase shares of its common stock
concurrently with or shortly after the pricing of the notes. In
addition, Cerence expects that certain purchasers of the notes
offered in the offering may establish a short position with respect
to its common stock by short selling the common stock or by
entering into short derivative positions with respect to the common
stock, in each case, in connection with the offering. The net
effect of the above market activities by holders of 2025 notes and
purchasers of the notes offered in the offering could increase (or
reduce the size of any decrease in) or decrease (or reduce the size
of any increase in) the market price of Cerence’s common stock
and/or the market price of the notes offered in the offering or the
2025 notes and may have affected the initial conversion price of
the notes, and Cerence cannot predict the magnitude of such market
activities or the overall effect they will have on the market price
of its common stock, the market price of the notes offered in the
offering or the 2025 notes.
The notes will be sold only to persons reasonably
believed to be qualified institutional buyers pursuant to Rule 144A
under the Securities Act. The notes and the common stock, if any,
issuable upon conversion of the notes are not being registered
under the Securities Act, or the securities laws of any other
jurisdiction. The notes and the common stock issuable upon
conversion of the notes, if any, may not be offered or sold in the
United States except in transactions exempt from, or not subject
to, the registration requirements of the Securities Act and any
applicable state securities laws.
This press release does not constitute an offer to
sell or a solicitation of an offer to buy the securities described
herein, nor shall there be any sale of these securities in any
state or jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of such jurisdiction.
About Cerence Inc.
Cerence is the global industry leader in creating
unique, moving experiences for the mobility world. As an innovation
partner to the world’s leading automakers and mobility OEMs, it is
helping advance the future of connected mobility through intuitive,
AI-powered interaction between humans and their vehicles,
connecting consumers’ digital lives to their daily journeys no
matter where they are. Cerence’s track record is built on more than
20 years of knowledge and 475 million cars shipped with Cerence
technology. Whether it’s connected cars, autonomous driving,
e-vehicles, or two-wheelers, Cerence is mapping the road ahead.
Forward-Looking Statements
This press release contains “forward-looking
statements” within the meaning of the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995, including but
not limited to, statements relating to: the timing and closing of
the offering of notes and the 2025 notes repurchases; the intended
use of the net proceeds from the offering; and the potential
effects of the 2025 notes repurchases on Cerence’s common stock and
the market price of the notes and the 2025 notes. Any statements
that are not statements of historical fact (including statements
containing the words “believes,” “plans,” “anticipates,” “expects,”
“intends” or “estimates” or similar expressions) should also be
considered to be forward-looking statements. Although Cerence
believes the forward-looking statements included in this press
release are based upon reasonable assumptions, such statements
involve known and unknown risks, uncertainties and other factors,
which may cause actual results to be materially different from any
future results expressed or implied by such forward-looking
statements, including but not limited to: risks related to whether
Cerence will consummate the offering of the notes, the actual use
of the net proceeds from the offering, which could change from
Cerence’s intended use of the net proceeds as a result of market
conditions or for other reasons, prevailing market and other
general economic, industry or political conditions in the United
States or internationally, the impacts of the COVID-19 pandemic on
our and our customers’ businesses, the impact of the war in Ukraine
on our and our customers’ businesses and whether Cerence will be
able to satisfy the conditions required to close any sale of the
notes or the 2025 notes repurchases. The foregoing list of risks
and uncertainties is illustrative, but is not exhaustive. For
information about other potential factors that could affect
Cerence’s business and financial results, please review the “Risk
Factors” described in Cerence’s Annual Report on Form 10-K for the
year ended September 30, 2022 and Cerence’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2023 filed with the
Securities and Exchange Commission (the “SEC”) and in Cerence’s
other filings with the SEC. Except as may be required by law,
Cerence disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the date of
this press release.
Kate Hickman | Tel: 339-215-4583 |
Email: kate.hickman@cerence.com
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