Inphi Corporation (NYSE: IPHI) today announced the pricing of
$440.0 million aggregate principal amount of 0.75% convertible
senior notes due 2025 (the “notes”) in a private placement to
qualified institutional buyers pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”). In connection with the offering, The
principal amount of the offering was increased from the previously
announced offering size of $330.0 million. Inphi granted the
initial purchasers of the notes a 13-day option to purchase up to
an additional $66.0 million aggregate principal amount of notes on
the same terms and conditions. The sale of the notes is scheduled
to close on April 24, 2020, subject to satisfaction of customary
closing conditions.
Inphi estimates that the net proceeds from this offering will be
approximately $428.2 million, after deducting the initial
purchasers’ discount and estimated offering expenses payable by
Inphi, and assuming no exercise of the initial purchasers’ option
to purchase additional notes. Inphi intends to use approximately
$48.4 million of the net proceeds from the offering of the notes to
pay the cost of certain capped call transactions described below.
Inphi also intends to use approximately $99.9 million of the net
proceeds from the offering of the notes to pay the cash portion of
the consideration, representing the principal amount exchanged and
accrued and unpaid interest thereon, Inphi delivers in connection
with the exchange transactions for its existing 1.125% Convertible
Senior Notes due 2020 (the “2020 Notes”) described below. Inphi
intends to use the remainder of the net proceeds from the offering
of the notes for general corporate purposes, including payments
with respect to its outstanding 2020 Notes when due and financing
potential acquisitions and other strategic transactions. However,
Inphi currently has no commitments with respect to any such
acquisitions or other strategic transactions.
If the initial purchasers exercise their option to purchase
additional notes, Inphi intends to use a portion of the resulting
additional net proceeds from the sale of the additional notes to
pay the cost of entering into additional capped call transactions
and the remainder of the net proceeds from the sale of the
additional notes for general corporate purposes.
Contemporaneously with the pricing of the offering, Inphi
entered into separate and privately negotiated transactions with
certain holders of the 2020 Notes to exchange approximately $99.5
million in aggregate principal amount of the 2020 Notes for an
aggregate of approximately $99.9 million in cash, representing the
principal amount exchanged and accrued and unpaid interest thereon,
and approximately 1.4 million shares of Inphi’s common stock. Inphi
expects that holders of 2020 Notes that exchange their 2020 Notes
may purchase or sell shares of Inphi’s common stock and/or enter
into or unwind various derivatives with respect to Inphi’s common
stock (including entering into derivatives with one or more of the
initial purchasers or their respective affiliates) concurrently
with or shortly after the pricing of the notes. This activity could
affect the market price of Inphi’s common stock.
When issued, the notes will be unsecured, senior obligations of
Inphi, and will pay interest semi-annually in arrears at a rate of
0.75% per year. Prior to the close of business on the business day
immediately preceding October 15, 2024, the notes will be
convertible only under certain circumstances and during certain
periods, and thereafter, at any time until the close of business on
the second scheduled trading day immediately preceding the maturity
date. The initial conversion rate for the notes will be 8.0059
shares per $1,000 principal amount of notes, which is equivalent to
an initial conversion price of approximately $124.91 per share, and
will be subject to adjustment upon the occurrence of certain
events. The initial conversion price represents a conversion
premium of approximately 32.5% over the last reported sale price of
$94.27 per share of Inphi’s common stock on The New York Stock
Exchange on April 21, 2020. Inphi will settle conversions of the
notes by paying or delivering, 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. Prior to April 20, 2023, the notes will not
be redeemable. Inphi may redeem all or any portion of the notes, at
its option, on or after April 20, 2023, if the last reported sale
price of Inphi’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) during any 30 consecutive trading day
period (including the last trading day of such period) ending on,
and including, the trading day immediately preceding the date on
which Inphi provides notice of redemption at a redemption price
equal to 100% of the principal amount of the notes to be redeemed,
plus accrued and unpaid interest to, but excluding, the redemption
date. Holders of notes may require Inphi to repurchase their notes
upon the occurrence of a fundamental change (as defined in the
indenture governing the notes) at a purchase price equal to the
principal amount thereof plus accrued and unpaid interest to, but
excluding, the repurchase date. In addition, in connection with
certain corporate events or if Inphi issues a notice of redemption,
it will, under certain circumstances, increase the conversion rate
for holders who elect to convert their notes in connection with
such corporate event or such notice of redemption, as the case may
be.
In connection with the pricing of the notes, Inphi entered into
privately negotiated capped call transactions with an affiliate of
one of the initial purchasers and certain other financial
institutions (the “option counterparties”). The capped call
transactions are expected generally to reduce the potential
dilution to Inphi’s common stock upon any conversion of the notes
and/or offset the cash payments Inphi is required to make in excess
of the principal amount upon conversion of the notes in the event
that the market price of Inphi’s common stock is greater than the
strike price of the capped call transactions, which initially
corresponds to the initial conversion price of the notes or
approximately $124.91 per share, with such reduction subject to a
cap based on the cap price of the capped call transactions. The cap
price of the capped call transactions will initially be $188.54 per
share, which represents a premium of 100% over the last reported
sale price of Inphi’s common stock on April 21, 2020, and is
subject to certain adjustments under the terms of the capped call
transactions. If the initial purchasers exercise their option to
purchase additional notes, then Inphi expects to enter into
additional capped call transactions with the option
counterparties.
Inphi expects that, in connection with establishing their
initial hedge of the capped call transactions, the option
counterparties or their respective affiliates will purchase shares
of Inphi’s common stock and/or enter into various derivative
transactions with respect to Inphi’s 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 Inphi’s common stock or the notes at that time.
In addition, Inphi has been advised by the option counterparties
that the option counterparties or their respective affiliates may
modify their hedge positions by entering into or unwinding various
derivative transactions with respect to Inphi’s common stock and/or
purchasing or selling Inphi’s common stock 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 the valuation
period for the capped call transactions, which is expected to occur
during the 30 trading day period beginning on the 31st scheduled
trading day prior to the maturity of the notes). This activity
could also cause or avoid an increase or a decrease in the market
price of Inphi’s 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, it could affect the amount and value of
the consideration that noteholders will receive upon conversion of
the notes.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy 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 Inphi’s common stock issuable upon conversion of the notes, if
any, have not been registered under the Securities Act or the
securities laws of any other jurisdiction and, unless so
registered, may not be offered or sold in the United States except
pursuant to an exemption from such registration requirements.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding the expected closing date of
the offering, the intended use of net proceeds from the offering,
the extent and potential effects of the capped call transactions
and the exchanges of the 2020 Notes. These forward-looking
statements are subject to risks and uncertainties that may cause
actual results to differ materially, including risks related to
whether Inphi will be able to satisfy the conditions required to
close the sale of the notes and the exchanges of the 2020 Notes,
whether the capped call transactions will become effective and the
fact that Inphi’s management will have broad discretion in the use
of the proceeds from any sale of the notes, and other risks
detailed from time to time in Inphi’s filings with the Securities
and Exchange Commission, including its Annual Report on Form 10-K
for the year ended December 31, 2019 and its Current Report on Form
8-K dated April 21, 2020. All forward-looking statements in this
press release are based on information available to Inphi as of the
date hereof, and Inphi does not assume any obligation to update the
forward-looking statements provided to reflect events that occur or
circumstances that exist after the date on which they were made
except as required by law.
Investor Contact:
Vernon P. Essi, Jr.
408-606-6524
vessi@inphi.com
Corporate Contact:
Kim Markle
408-217-7329
kmarkle@inphi.com
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