Granite Construction Incorporated (NYSE: GVA) (“Granite”) today
announced the pricing of its previously announced offering of $325
million aggregate principal amount of 3.25% Convertible Senior
Notes due 2030 (the “Convertible Notes”). In connection with the
offering of the Convertible Notes, Granite granted the initial
purchasers of the Convertible Notes the right to purchase up to an
additional $48.75 million aggregate principal amount of Convertible
Notes. The sale of the Convertible Notes is expected to close on
June 11, 2024, subject to customary closing conditions.
The Convertible Notes will bear interest at a rate of 3.25% per
annum, payable semi-annually in arrears on June 15 and December 15
of each year, beginning on December 15, 2024. The Convertible Notes
will mature on June 15, 2030, unless earlier converted, redeemed or
repurchased in accordance with their terms. The Convertible Notes
will have an initial conversion rate of 12.8398 shares of Granite’s
common stock per $1,000 principal amount of the Convertible Notes
(equivalent to an initial conversion price of approximately $77.88
per share of Granite’s common stock). The initial conversion price
represents a premium of approximately 30% to the $59.91 per share
closing price of Granite’s common stock on The New York Stock
Exchange on June 6, 2024. Prior to the close of business on the
business day immediately preceding December 15, 2029, the
Convertible Notes will be convertible at the option of the holders
only upon the occurrence of certain events and during certain
periods. Thereafter, the Convertible Notes will be convertible at
the option of the holders at any time until the close of business
on the second scheduled trading day immediately preceding their
maturity date. Upon conversion, Granite will pay cash up to the
aggregate principal amount of the Convertible Notes to be converted
and pay or deliver, as the case may be, cash, shares of Granite’s
common stock, or a combination of cash and shares of Granite’s
common stock, at Granite’s election, in respect of the remainder,
if any, of its conversion obligation in excess of the aggregate
principal amount of the Convertible Notes being converted.
Granite will not be permitted to redeem the Convertible Notes
prior to June 21, 2027. On or after June 21, 2027, Granite may
redeem for cash all or any portion of the Convertible Notes, at its
option, if the last reported sale price of Granite’s common stock
has been at least 130% of the conversion price then in effect for a
specified period of time. The redemption price will equal 100% of
the principal amount of the Convertible Notes to be redeemed, plus
accrued and unpaid interest to, but excluding, the redemption date.
Holders of the Convertible Notes will be able to require Granite to
repurchase their Convertible Notes following certain corporate
transactions at a repurchase price equal to 100% of the principal
amount of the Convertible Notes to be repurchased, plus accrued and
unpaid interest, if any, to, but excluding, the repurchase date.
Following certain corporate transactions or if Granite issues a
notice of redemption, Granite will, in certain circumstances,
increase the conversion rate for a holder that elects to convert
its Convertible Notes in connection with such corporate transaction
or notice of redemption.
Granite estimates that the net proceeds from the offering will
be approximately $316.6 million (or approximately $364.2 million if
the initial purchasers exercise their option to purchase additional
Convertible Notes in full), after deducting the initial purchasers’
discount and estimated offering expenses payable by Granite.
Granite intends to use approximately $40.0 million of the net
proceeds from the Convertible Notes offering to pay the cost of
entering into capped call transactions in connection with the
Convertible Notes. In addition, Granite intends to pay
approximately $57.6 million of the net proceeds from the
Convertible Notes offering to repurchase approximately $30.2
million in aggregate principal amount of its 2.75% convertible
senior notes due 2024 (the “2024 notes”) in separate and
individually negotiated transactions entered into concurrently with
the pricing of the offering (the “2024 notes repurchases”). Granite
intends to use the remainder of the net proceeds from the
Convertible Notes offering to repay amounts outstanding under its
term loan and for general corporate purposes, which may include
acquisitions or share repurchases. If the initial purchasers
exercise their option to purchase additional Convertible Notes,
Granite intends to use a portion of the additional net proceeds to
pay the cost of entering into additional capped call transactions
and the remainder of the net proceeds from the sale of the
additional Convertible Notes for general corporate purposes.
In connection with the repurchase transactions described above,
Granite expects that holders of the 2024 notes party to such
repurchase transactions may enter into or unwind various
derivatives with respect to Granite’s common stock (including
entering into derivatives with one or more of the initial
purchasers in the Convertible Notes offering or their respective
affiliates) and/or purchase or sell shares of Granite’s common
stock concurrently with or shortly after the pricing of the
Convertible Notes offering. This activity could affect the market
price of Granite’s common stock and the initial conversion price of
the Convertible Notes. Granite cannot predict the magnitude of such
market activity or the overall effect it will have on the price of
the Convertible Notes or its common stock.
In connection with the pricing of the Convertible Notes, Granite
entered into privately negotiated capped call transactions with
certain of the initial purchasers of the Convertible Notes or their
respective affiliates and certain other financial institutions (the
“option counterparties”). The capped call transactions will cover,
subject to anti-dilution adjustments substantially similar to those
applicable to the Convertible Notes, the number of shares of
Granite’s common stock initially underlying the Convertible Notes.
If the initial purchasers of the Convertible Notes exercise their
option to purchase additional Convertible Notes, Granite expects to
enter into additional capped call transactions with the option
counterparties.
The cap price of the capped call transactions will initially be
$119.82 per share, which represents a premium of 100% over the last
reported sale price of Granite’s common stock of $59.91 per share
on The New York Stock Exchange on June 6, 2024, and is subject to
certain adjustments under the terms of the capped call
transactions.
The capped call transactions are expected generally to reduce
the potential dilution to Granite’s common stock upon any
conversion of the Convertible Notes and/or offset any cash payments
Granite is required to make in excess of the principal amount of
converted Convertible Notes, as the case may be. If, however, the
market price per share of Granite’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 cash payments, in each
case, to the extent that such market price exceeds the cap price of
the capped call transactions.
Granite has been advised that, in connection with establishing
their initial hedges of the capped call transactions, the option
counterparties or their respective affiliates expect to enter into
various derivative transactions with respect to Granite’s common
stock and/or purchase shares of Granite’s common stock concurrently
with or shortly after the pricing of the Convertible Notes. This
activity could increase (or reduce the size of any decrease in) the
market price of Granite’s common stock or the Convertible 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 Granite’s common
stock and/or purchasing or selling shares of Granite’s common stock
or other securities of Granite in secondary market transactions
following the pricing of the Convertible Notes and prior to the
maturity of the Convertible Notes (and are likely to do so during
any observation period related to a conversion of the Convertible
Notes, following any repurchase of the Convertible Notes in
connection with any fundamental change or redemption of the
Convertible Notes at Granite’s option or, to the extent Granite
unwinds a corresponding portion of the capped call transactions, in
connection with any other repurchase of the Convertible Notes).
This activity could also cause or hinder an increase or decrease in
the market price of Granite’s common stock or the Convertible
Notes, which could affect the holders’ ability to convert the
Convertible Notes and, to the extent the activity occurs during any
observation period related to a conversion of the Convertible
Notes, it could affect the amount of cash and the number and value
of shares of Granite’s common stock, if any, that holders will
receive upon conversion of the Convertible Notes.
In connection with the issuance of the 2024 notes, Granite
entered into convertible note hedge transactions (the “existing
convertible note hedge transactions”) with certain financial
institutions (the “existing counterparties”), and Granite also
entered into separate warrant transactions (the “existing warrant
transactions”) with the existing counterparties. In connection with
the 2024 notes repurchases, Granite entered into partial unwind
agreements (the “Unwind Agreements”) with the existing
counterparties, concurrently with the offering, to unwind a
corresponding portion of the existing convertible note hedge
transactions and the existing warrant transactions (collectively,
the “Unwind Transactions”). In connection with the Unwind
Transactions and pursuant to the Unwind Agreements, Granite will
receive approximately 261,000 shares of Granite’s common stock in
respect of the unwind of the portions of the existing convertible
note hedge transactions and the existing warrant transactions that
correspond to the 2024 notes repurchases.
In connection with the Unwind Transactions, the existing
counterparties and/or their respective affiliates may enter into or
unwind various derivative transactions with respect to Granite’s
common stock and/or purchase or sell shares of Granite’s common
stock or other securities of Granite in secondary market
transactions concurrently with or shortly after the pricing of the
Convertible Notes. This activity may affect the price of Granite’s
common stock and, in turn, impact the initial conversion price of
the Convertible Notes.
The Convertible Notes will be offered through a private
placement. The Convertible Notes and the shares of Granite’s common
stock issuable upon conversion of the Convertible Notes, if any,
have not been and will not be registered under the Securities Act
of 1933 (the “Securities Act”), or any state securities laws. As a
result, neither the Convertible Notes nor any common stock issuable
upon conversion of the Convertible Notes may be offered or sold in
the United States except pursuant to an applicable exemption from,
or in a transaction not subject to, the registration requirements
of the Securities Act and applicable state securities laws.
Accordingly, the Convertible Notes will be offered only to persons
reasonably believed to be “qualified institutional buyers” under
Rule 144A of the Securities Act. This news release is neither an
offer to sell nor a solicitation of an offer to buy the Convertible
Notes or any common stock issuable upon conversion of the
Convertible Notes, nor shall there be any sale of any securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful.
Forward-looking Statements
Any statements contained in this news release that are not based
on historical facts, including statements about the offering, the
expected closing of the offering, the intended use of proceeds,
third parties entering into or unwinding derivative transactions
with respect to Granite’s common stock and/or purchasing or selling
Granite’s common stock, and the potential impact of the capped call
transactions, the 2024 notes repurchases, the Unwind Transactions
and third parties entering into or unwinding derivative
transactions with respect to Granite’s common stock and/or
purchasing or selling Granite’s common stock on dilution to
Granite’s stockholders or the offset of any cash payments Granite
is required to make in excess of the principal amount of converted
Convertible Notes, the market price of Granite’s common stock or
the Convertible Notes or the initial conversion price of the
Convertible Notes, constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are identified by words such as
“expects,” “estimates,” “intends,” “plans,” “potential,” “may,”
“will,” “could,” “would” and the negatives thereof or other
comparable terminology or by the context in which they are made.
These forward-looking statements are predictions reflecting the
best judgment of senior management and reflect our current
expectations regarding the offering, the expected closing of the
offering, the intended use of proceeds, third parties entering into
or unwinding derivative transactions with respect to Granite’s
common stock and/or purchasing or selling Granite’s common stock,
and the potential impact of the capped call transactions, the 2024
notes repurchases, the Unwind Transactions and third parties
entering into or unwinding derivative transactions with respect to
Granite’s common stock and/or purchasing or selling Granite’s
common stock on dilution to Granite’s stockholders or the offset of
any cash payments Granite is required to make in excess of the
principal amount of converted Convertible Notes, the market price
of Granite’s common stock or the Convertible Notes or the initial
conversion price of the Convertible Notes. These expectations may
or may not be realized. Some of these expectations may be based on
beliefs, assumptions or predictions that may prove to be incorrect.
In addition, our business and operations involve numerous risks and
uncertainties, many of which are beyond our control, which could
result in our expectations not being realized or otherwise
materially affect our business, financial condition, results of
operations, cash flows and liquidity. Such risks and uncertainties
include, but are not limited to, the risks related to whether
Granite will consummate the offering of the Convertible Notes on
the expected terms or at all, the anticipated terms of, and the
effects of entering into, the capped call transactions, the 2024
notes repurchases, the Unwind Transactions and third parties
entering into or unwinding derivative transactions with respect to
Granite’s common stock and/or purchasing or selling Granite’s
common stock, market and general conditions, and those described in
greater detail in our filings with the Securities and Exchange
Commission, particularly those described in our Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q.
Due to the inherent risks and uncertainties associated with our
forward-looking statements, the reader is cautioned not to place
undue reliance on them. The reader is also cautioned that the
forward-looking statements contained herein speak only as of the
date of this news release and, except as required by law; we
undertake no obligation to revise or update any forward-looking
statements for any reason.
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version on businesswire.com: https://www.businesswire.com/news/home/20240606956708/en/
Investors Wenjun Xu, 831-761-7861 Or Media Erin
Kuhlman, 831-768-4111
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