MKS Instruments, Inc. (NASDAQ: MKSI) (“MKS”) today announced the
closing of its offering of $1.4 billion aggregate principal amount
of its 1.25% convertible senior notes due 2030 (the “notes”). The
net proceeds from the offering were approximately $1,374.2 million,
after deducting the initial purchasers’ discounts and estimated
offering expenses payable by MKS. The net proceeds include the full
exercise of the $200.0 million option granted by MKS to the initial
purchasers of the notes. The notes were 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 used approximately $167.4 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 $1,206.0 million in borrowings
outstanding under its First Lien USD tranche B term loan, together
with accrued interest, as well as for general corporate
purposes.
The notes are unsecured, senior obligations of MKS and 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 is initially 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 is 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, and in connection
with the exercise in full by the initial purchasers of their option
to purchase additional notes, MKS has entered into privately
negotiated capped call transactions with certain of the initial
purchasers or their respective affiliates and other financial
institutions (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.
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 were 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.
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 use of proceeds from the offering and the potential effects of
entering into the capped call transactions. 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 final
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 RyzhikVice President,
Investor RelationsTelephone: (978) 557-5180Email:
david.ryzhik@mksinst.com
Press Relations Contacts: Bill CaseySenior Director, Marketing
CommunicationsTelephone: (630)
995-6384Email: press@mksinst.com
Kerry Kelly, PartnerKekst
CNCEmail: kerry.kelly@kekstcnc.com
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