MercadoLibre, Inc. (Nasdaq:MELI) today announced the pricing of its
previously announced offering of US$800 million aggregate principal
amount of 2.00% Convertible Senior Notes due 2028 (the "notes").
MercadoLibre has granted the initial purchasers a 13-day option to
purchase up to an additional US$120 million principal amount of
notes. The offering is expected to close on August 24, 2018,
subject to customary closing conditions.
Interest on the notes will be paid semiannually in arrears on
February 15 and August 15 of each year at the rate of 2.00% per
year, beginning on February 15, 2019. The notes will mature on
August 15, 2028, unless earlier repurchased, redeemed or converted
in accordance with their terms. Prior to February 15, 2028, the
notes will be convertible at the option of holders of the notes
only upon satisfaction of certain conditions and during certain
periods, while after February 15, 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. Upon
conversion, holders of the notes will receive shares of
MercadoLibre's common stock, cash or a combination thereof, at
MercadoLibre's election. The conversion rate for the notes will
initially be 2.2553 shares of MercadoLibre's common stock per
$1,000 principal amount of notes, which is equivalent to an initial
conversion price of approximately $443.40 per share, and is subject
to adjustment under the terms of the notes. This represents a
premium of approximately 35% over the last reported sale price of
$328.45 per share of MercadoLibre's common stock on The Nasdaq
Global Select Market on August 21, 2018.
Holders of the notes may require MercadoLibre to repurchase
their notes upon the occurrence of a fundamental change prior to
maturity for cash at a repurchase price equal to 100% of the
principal amount of the notes to be repurchased plus accrued and
unpaid interest, if any. MercadoLibre will not have the right to
redeem the notes prior to August 21, 2023. On or after August 21,
2023, if the last reported sale price of MercadoLibre's common
stock has been at or above 130% of the conversion price during
specified periods, MercadoLibre may (at its option) redeem all or
any portion of the notes for cash equal to the notes’ principal
amount plus accrued and unpaid interest to, but excluding, the
redemption date.
In connection with the pricing of the notes, MercadoLibre
entered into privately negotiated capped call transactions with
certain of the initial purchasers of the notes or their respective
affiliates and other financial institutions (the "option
counterparties") having an expiration date of August 21, 2023. The
capped call transactions cover, subject to anti-dilution
adjustments substantially similar to those applicable to the notes,
the number of shares of MercadoLibre's common stock underlying the
notes and are expected generally to reduce potential dilution to
MercadoLibre's common stock upon any conversion of notes prior to
the expiration date and/or offset any cash payments MercadoLibre is
required to make in excess of the principal amount of any such
converted notes, as the case may be, in the event that the market
price per share of MercadoLibre's common stock, as measured under
the terms of the capped call transactions, is greater than the
strike price of the capped call transactions (which initially
corresponds to the initial conversion price of the notes and is
subject to certain adjustments substantially similar to those
contained in the notes). If, however, the market price per share of
MercadoLibre's 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, upon exercise of the options that are a part of the capped
call transactions to the extent that such market price exceeds the
cap price of the capped call transactions. In addition, to the
extent any observation period for any converted notes does not
correspond to the period during which the market price of
MercadoLibre’s common stock is measured under the terms of the
capped call transactions, there could also be dilution and/or a
reduced offset of any such cash payments as a result of the
different measurement periods. If the initial purchasers of the
notes exercise their option to purchase additional notes,
MercadoLibre expects to enter into additional capped call
transactions with the option counterparties. In addition, to the
extent the notes remain outstanding at the expiration of the capped
call transactions, MercadoLibre may seek to extend the expiration
of these capped call transactions or enter into new capped call
transactions.
MercadoLibre has been advised that, in connection with
establishing their initial hedges of the capped call transactions,
the option counterparties or their respective affiliates have
purchased shares of MercadoLibre’s common stock and/or entered into
various derivative transactions with respect to MercadoLibre'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 MercadoLibre's common stock or the
notes at that time.
In addition, MercadoLibre has been advised that the option
counterparties or their respective affiliates may modify their
hedge positions by entering into or unwinding various derivative
transactions with respect to MercadoLibre's common stock and/or
purchasing or selling MercadoLibre's common stock or other
securities of MercadoLibre in secondary market transactions
following the pricing of the notes and prior to final settlement of
the capped call transactions. This activity could also cause or
avoid an increase or a decrease in the market price of
MercadoLibre's common stock or the notes, which could affect the
ability of holders of the notes to convert the notes and, to the
extent the activity occurs during any observation period related to
a conversion of notes, it could affect the number of shares and
value of the consideration that holders of the notes will receive
upon conversion of the notes.
The options MercadoLibre holds under the capped call
transactions will be exercised on their expiration date, and in the
event MercadoLibre repurchases, exchanges or redeems any notes or
any notes are converted prior to the expiration of the capped call
transactions, a corresponding portion of the capped call
transactions may be terminated at MercadoLibre's option.
MercadoLibre has been advised that the option counterparties or
their respective affiliates, in order to unwind their hedge
positions with respect to those exercised or terminated options,
are likely to buy or sell shares of MercadoLibre's common stock or
other securities or instruments of MercadoLibre, including the
notes, in secondary market transactions or unwind various
derivative transactions with respect to such common stock during
the relevant valuation period under the capped call transactions,
which may correspond to any observation period for any converted
notes. These unwind activities could have the effect of increasing
or decreasing the trading price of MercadoLibre's common stock and,
to the extent the activity occurs during any observation period
related to a conversion of notes, could have the effect of
increasing or reducing the value of the consideration that holders
of the notes will receive upon conversion of the notes.
MercadoLibre estimates that the net proceeds from the offering
of the notes will be approximately $785.1 million (or approximately
$903.0 million if the initial purchasers of the notes exercise
their option to purchase additional notes in full), after deducting
fees and estimated expenses. MercadoLibre expects to use
approximately $83.4 million of the net proceeds from the offering
of the notes to pay the cost of the capped call transactions.
MercadoLibre intends to use a portion of the remainder of the net
proceeds from the offering to enter into separate transactions to
repurchase or exchange and retire approximately $263.7 million
principal amount of its outstanding 2.25% convertible senior notes
due 2019 (the “2019 notes”) concurrently with the offering of the
notes. The related consideration is expected to consist of
approximately $348.1 million in cash and approximately 1.0 million
shares of MercadoLibre’s common stock. The terms of these separate
transactions to repurchase or exchange and retire a portion of
MercadoLibre’s 2019 notes have been individually negotiated.
These exchanges and repurchases of MercadoLibre’s outstanding 2019
notes could affect the market price of its common stock.
MercadoLibre also expects that holders of the 2019 notes that sell
or exchange their 2019 notes in these separate transactions may
purchase shares of its common stock in the market to hedge their
exposure in connection with these transactions. This activity could
affect the market price of MercadoLibre’s common stock. The
remaining net proceeds will be used for general corporate
purposes.
In connection with the 2019 notes, MercadoLibre entered into
capped call transactions (the “existing capped call transactions”)
with certain financial institutions (the “existing option
counterparties”) in each of June 2014, September 2017 and March
2018. In connection with MercadoLibre’s intended repurchase and
exchanges of 2019 notes, MercadoLibre expects to enter into
agreements with the existing option counterparties to the existing
capped call transactions entered into in June 2014 to terminate a
portion of those transactions, in each case, in a notional amount
corresponding to the amount of 2019 notes so repurchased and/or
exchanged. MercadoLibre also expects to enter into agreements with
certain of the existing option counterparties to the existing
capped call transactions entered into in September 2017 to
terminate such existing capped call transactions either in part or
in full, in the aggregate in a notional amount corresponding to the
amount of 2019 notes so repurchased and/or exchanged. In connection
with any termination of existing capped call transactions and the
related unwinding of the existing hedge position of the
counterparties to such transactions with respect to such
transactions, such counterparties and/or their respective
affiliates may sell shares of MercadoLibre’s common stock in
secondary market transactions, and/or unwind various derivative
transactions with respect to MercadoLibre’s common stock. This
activity could decrease (or reduce the size of any increase in) the
market price of MercadoLibre’s common stock at that time and it
could decrease (or reduce the size of any increase in) the market
value of the notes. In connection with these transactions,
MercadoLibre expects to receive payments from the existing option
counterparties in amounts that depend on the market price of
MercadoLibre’s common stock at such times as agreed with the
relevant existing option counterparties.
The notes and the common stock, if any, deliverable upon
conversion of the notes have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any other jurisdiction. They may be offered and
sold only in a transaction not subject to, or exempt from,
registration under the Securities Act and other applicable
securities laws. Accordingly, the notes are being offered only to
qualified institutional buyers in accordance with Rule 144A under
the Securities Act.
This press release shall not constitute an offer to sell or
purchase, or a solicitation of an offer to purchase or sell, any
securities.
About MercadoLibre
MercadoLibre hosts the largest online commerce and payments
ecosystem in Latin America. Its efforts are centered on enabling
e-commerce and digital and mobile payments on behalf of its
customers by delivering a suite of technology solutions across the
complete value chain of commerce. The company is present in 18
countries including: Argentina, Brazil, Mexico, Colombia, Chile,
Venezuela and Peru. Based on unique visitors and page views
MercadoLibre is the market leader in each of the major countries
where it is present.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
and other federal securities laws. Any statements contained herein
which do not describe historical facts, including but not limited
to statements regarding: the potential effects of the capped call
transactions or the exchanges and repurchases of MercadoLibre’s
outstanding 2019 notes, the terms and timing of the exchanges and
repurchases of MercadoLibre’s outstanding 2019 notes, the
anticipated use of proceeds of the offering (including the amount,
terms and timing of any exchanges or repurchases of 2019 notes and
the composition of related consideration) and the completion of the
offering (including related timing), are forward-looking statements
which involve risks and uncertainties that could cause actual
results to differ materially from those discussed in such
forward-looking statements. Unless required by law,
MercadoLibre, Inc. undertakes no obligation to publicly update or
revise any forward-looking statements to reflect circumstances or
events after the date hereof.
CONTACT: MercadoLibre, Inc. Investor
Relations investor@mercadolibre.com
http://investor.mercadolibre.com
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