MKS Instruments, Inc. (NASDAQ: MKSI) (“MKS”) today announced the
pricing of its offering of $1.2 billion aggregate principal amount
of 1.25% convertible senior notes due 2030 (the “notes”). The notes
will be offered and sold in a private placement (the “offering”) to
persons reasonably believed to be qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as amended
(the “Securities Act”). MKS also granted to the initial purchasers
of the notes an option to purchase, within a 13-day period
beginning on, and including, the date MKS first issues the notes,
up to an additional $200.0 million aggregate principal amount of
the notes. The offering is expected to close on May 16, 2024,
subject to satisfaction of customary closing conditions. The
offering was upsized from the previously announced offering of $1.0
billion aggregate principal amount of convertible senior notes.
MKS estimates that the net proceeds from the
offering will be approximately $1,177.7 million (or approximately
$1,374.2 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
MKS.
MKS intends to use approximately $143.52 million
of the net proceeds from the offering to pay the cost of the capped
call transactions described below. MKS intends to use the remaining
net proceeds from the offering to repay approximately $1,034.1
million in borrowings outstanding under its First Lien USD tranche
B term loan, together with accrued interest, as well as for general
corporate purposes. If the initial purchasers exercise their option
to purchase additional notes, MKS intends to use a portion of the
net proceeds from the sale of such additional notes to enter into
additional capped call transactions with certain of the initial
purchasers or their respective affiliates and other financial
institutions (the “option counterparties”) and the balance to repay
additional borrowings, together with accrued interest, under its
First Lien USD tranche B term loan.
The notes will be unsecured, senior obligations of
MKS and will bear interest at a rate of 1.25% per annum, payable
semi-annually in arrears on June 1 and December 1 of each year,
beginning on December 1, 2024. The notes will mature on June 1,
2030, unless earlier converted, redeemed or repurchased in
accordance with their terms. Subject to certain conditions, on or
after June 5, 2027, MKS may redeem for cash all or any portion of
the notes 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, if the last
reported sale price of MKS 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 the period of 30 consecutive
trading days ending on, and including, the trading day immediately
preceding the date the notice of redemption is sent.
The conversion rate for the notes will initially
be 6.4799 shares of MKS common stock per $1,000 principal amount of
notes, which is equivalent to an initial conversion price of
approximately $154.32 per share. This represents a premium of
approximately 30.0% over the last reported sale price of $118.71
per share of MKS common stock on The Nasdaq Global Select Market on
May 13, 2024. The conversion rate will be subject to adjustment
upon the occurrence of certain events.
Upon conversion, MKS will pay cash up to the
aggregate principal amount of the notes to be converted and pay or
deliver, as the case may be, cash, shares of common stock or a
combination of cash and shares of common stock, at MKS’s election,
in respect of the remainder, if any, of its conversion obligation
in excess of the aggregate principal amount of the notes being
converted. Prior to March 1, 2030, noteholders may convert all or
any portion of their notes only upon the occurrence of certain
events and during certain periods, and thereafter, at any time
until the second scheduled trading day immediately preceding the
maturity date.
If MKS undergoes a fundamental change (as defined
in the indenture governing the notes) prior to the maturity date of
the notes, holders may require MKS to repurchase for cash all or
any portion of their notes at a fundamental change repurchase price
equal to 100% of the principal amount of the notes to be
repurchased, plus any accrued and unpaid interest to, but
excluding, the fundamental change repurchase date.
In connection with the pricing of the notes, MKS
has entered into privately negotiated capped call transactions with
the option counterparties. The capped call transactions are
expected generally to reduce the potential dilution to MKS common
stock upon conversion of any notes and/or offset any cash payments
that MKS is required to make in excess of the principal amount of
any 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 is initially $237.42 per share of MKS common stock,
representing a premium of 100% over the last reported sale price of
$118.71 per share of MKS common stock on The Nasdaq Global Select
Market on May 13, 2024, and is subject to customary adjustments
under the terms of the capped call transactions. If the initial
purchasers exercise their option to purchase additional notes, MKS
expects to enter into additional capped call transactions with the
option counterparties.
MKS has been advised that, in connection with
establishing their initial hedges of the capped call transactions,
the option counterparties and/or their respective affiliates expect
to enter into various derivative transactions with respect to MKS
common stock and/or purchase shares of MKS 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 MKS common stock or the notes at that time.
In addition, MKS expects the option counterparties
and/or their respective affiliates may modify their hedge positions
by entering into or unwinding various derivatives with respect to
MKS common stock and/or purchasing or selling MKS common stock or
other securities of MKS in secondary market transactions following
the pricing of the notes and prior to the maturity of the notes
(and are likely to do so (x) during any observation period related
to a conversion of notes or following any optional redemption or
repurchase of notes by MKS in connection with any fundamental
change and (y) following any repurchase of notes by MKS other than
in connection with an optional redemption or fundamental change if
MKS elects to unwind a corresponding portion of the capped call
transactions in connection with any such repurchase). This activity
could cause or avoid an increase or a decrease in the market price
of MKS common stock or the notes, which could affect noteholders’
ability to convert the notes and, to the extent the activity occurs
following conversion or during any observation period related to a
conversion of notes, it could affect the amount and value of the
consideration that noteholders will receive upon conversion of such
notes.
The notes are being offered and sold to persons
reasonably believed to be qualified institutional buyers pursuant
to Rule 144A under the Securities Act. The offer and sale of the
notes and the shares of MKS common stock issuable upon conversion
of the notes, if any, have not been and will not be registered
under the Securities Act or any state securities laws and, unless
so registered, such securities may not be offered or sold in the
United States absent registration or an applicable exemption from,
or in a transaction not subject to, the registration requirements
of the Securities Act and other applicable securities laws. The
offering is being made only by means of a private offering
memorandum.
This press release shall not constitute an offer
to sell, or a solicitation of an offer to buy any securities, nor
shall there be any sale of, any securities in any state or
jurisdiction in which such offer, solicitation or sale would be
unlawful under the securities laws of any such state or
jurisdiction.
Safe Harbor for Forward Looking
Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended, including
regarding the timing and completion of the offering, the use of
proceeds from the offering, the terms of the notes and related
capped call transactions and the potential effects of entering into
the capped call transactions in connection with the pricing of the
notes. These statements are only predictions based on current
assumptions and expectations. Any statements that are not
statements of historical fact (including statements containing the
words “will,” “projects,” “intends,” “believes,” “plans,”
“anticipates,” “expects,” “estimates,” “forecasts,” “continues” and
similar expressions) should be considered to be forward-looking
statements. Forward-looking statements are not promises or
guarantees of future performance and are subject to a variety of
risks and uncertainties, many of which are beyond MKS’ control.
Actual results may differ materially from those described in the
forward-looking statements and will be affected by a variety of
risks and factors that are beyond our control including, without
limitation, market risks and uncertainties, the completion of the
offering on the anticipated terms or at all, and other important
risks and factors described in MKS’ Annual Report on Form 10-K for
the year ended December 31, 2023, any subsequent Quarterly Reports
on Form 10-Q, the preliminary offering memorandum related to the
offering and in subsequent filings made by MKS with the U.S.
Securities and Exchange Commission. Forward-looking statements
speak only as of the date hereof, and, except as required by law,
MKS undertakes no obligation to update or revise these
forward-looking statements.
MKS Investor Relations Contact: David Ryzhik Vice
President, Investor Relations Telephone: (978) 557-5180 Email:
david.ryzhik@mksinst.com
Press Relations Contacts: Bill Casey Senior
Director, Marketing Communications Telephone: (630) 995-6384
Email: press@mksinst.com
Kerry Kelly, Partner Kekst CNC
Email: kerry.kelly@kekstcnc.com
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