MILPITAS, CA, October 24, 2013 - SanDisk Corporation (NASDAQ: SNDK), a global leader in flash storage solutions, announced today the pricing of $1.3 billion principal amount of Convertible Senior Notes due in 2020 (the “notes”). The size of the offering of the notes was increased from the previously announced aggregate principal amount of $1.0 billion. The notes were priced at 100% of the aggregate principal amount and will bear interest at a rate of 0.50% per annum. The Company has granted the initial purchaser for the offering a 30-day option to purchase up to an additional $200.0 million principal amount of notes from the Company to cover over-allotments, if any.
The notes are being sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The sale of the notes is expected to close on October 29, 2013, subject to customary closing conditions.
The notes will be the Company’s senior unsecured obligations. The notes will pay interest semiannually in cash on April 15 and October 15 at a rate of 0.50% per year, and will mature on October 15, 2020. The initial conversion rate will be 10.8470 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $92.19 per share). The initial conversion price represents a premium of 35% to the $68.29 per share closing price of the Company's common stock on the NASDAQ Global Select Market on October 23, 2013. The notes will be convertible beginning on July 15, 2020, or earlier upon the occurrence of certain events. The holders of the notes will have the ability to require the Company to repurchase all or a portion of their notes for cash in the event of certain designated events. In such a case, the repurchase price will be 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest.
The Company estimates that the net proceeds from the offering will be approximately $1.28 billion, or approximately $1.48 billion if the initial purchaser exercises its over-allotment option in full, after deducting discounts and estimated offering expenses.
The Company intends to use a portion of the net proceeds of the offering to fund the cost of privately negotiated convertible note hedge transactions, which will serve to increase the effective conversion price of the notes. In addition, the Company intends to use a portion of the net proceeds to repurchase shares of its common stock from purchasers of the notes in privately negotiated transactions, each as described below. The remaining net proceeds are expected to be used for: (1) the repayment at maturity, or repurchase from time to time, of a portion or all of the Company’s currently outstanding indebtedness; (2) potential strategic investments or acquisitions; (3) the repurchase, from time to time, of shares of the Company’s common stock pursuant to the Company’s existing stock repurchase programs; and (4) other general corporate purposes, including capital expenditures related to manufacturing and technology.
The Company currently intends to use a portion of the net proceeds of the offering to fund the cost of privately negotiated convertible note hedge transactions (after taking into account the proceeds to it from warrant transactions) that the Company intends to enter into with the initial purchaser for the offering or other financial institutions (the “dealers”). The convertible note hedge transactions will cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that will initially underlie the notes. The Company also intends to enter into separate privately negotiated warrant transactions with such dealers or their affiliates, and anticipates that the warrants will have an exercise price that will initially be $122.92 per share, which represents an 80% premium to the closing sale price of the Company’s common stock on the NASDAQ Global Select Market on October 23, 2013. If the initial purchaser exercises its option to purchase additional notes, the Company may use a portion of the net proceeds from the sale of the additional notes to enter into additional convertible note hedge transactions, and the Company may enter into additional warrant transactions.
These convertible note hedge transactions and warrant transactions are expected to reduce the potential dilution with respect to the Company’s common stock upon conversion of the notes; however, the warrant transactions could have a dilutive effect with respect to the Company’s common stock to the extent that the market price per share of the Company’s common stock exceeds the strike price of the warrants.
In connection with these hedging transactions, such dealers or their affiliates expect to enter into various derivatives transactions and engage in other activities that could have the effect of increasing or preventing a decline in the price of the Company’s common stock in connection with the pricing of the notes offering. These activities may be discontinued at any time. In addition, in connection with any conversion of the notes, the dealers or their respective affiliates may enter into derivative transactions and engage in other activities that could adversely impact the price of the Company’s common stock and of the notes.
The Company currently intends to use a portion of the net proceeds of the offering to repurchase 2,196,514 shares of its common stock from purchasers of the notes in privately negotiated transaction effected through the initial purchaser or another financial institution, as the Company’s agent, at a purchase price of $68.29 per share, which is the closing price of the Company’s common stock on the NASDAQ Global Select Market on October 23, 2013.
This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities. Any offers of the notes will be made only by means of a confidential offering circular. The notes, the convertible note hedge transactions, the warrants and the shares of the Company’s common stock underlying these securities have not been and will not be registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements.
SanDisk Corporation (NASDAQ: SNDK), a Fortune 500 and S&P 500 company, is a global leader in flash storage solutions. For more than 25 years, SanDisk has expanded the possibilities of storage, providing trusted and innovative products that have transformed the electronics industry. Today, SanDisk’s quality, state-of-the-art solutions are at the heart of many of the world's largest data centers, and embedded in advanced smart phones, tablets and PCs. SanDisk’s consumer products are available at hundreds of thousands of retail stores worldwide. For more information, visit www.sandisk.com.
© 2013 SanDisk Corporation. All rights reserved. SanDisk is a trademark of SanDisk Corporation, registered in the United States and other countries.
This press release contains certain forward-looking statements, including statements regarding the timing of the closing of the offering of the notes and the Company’s intended use of proceeds from the offering, that are based on the Company’s current expectations and subject to numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate, including, among others:
Such risks and uncertainties could harm the Company’s business, financial condition and results of operations. The Company undertakes no obligation to update the information contained in this press release.