8-KMaterial AgreementsOther EventsExhibits & Filings

APPLIED MATERIALS INC /DE 8-K Report, Material Agreement (Jun 10, 2011)

Filed June 10, 2011For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) has filed a Form 8-K detailing the entry into a material definitive agreement concerning the issuance of $1.75 billion in senior unsecured notes. These notes are structured into three tranches with varying interest rates and maturity dates: $400 million at 2.650% due 2016, $750 million at 4.300% due 2021, and $600 million at 5.850% due 2041. The primary use of the proceeds from this offering is to finance a portion of the consideration and associated costs for Applied Materials' proposed merger with Varian Semiconductor Equipment Associates, Inc. (Varian). This debt issuance is a significant event for investors, as it directly relates to the funding of a major strategic acquisition. The filing outlines specific conditions under which the notes may be redeemed or repurchased, including failure to consummate the Varian merger by May 31, 2012, or a change in control coupled with a rating downgrade. The indenture includes standard covenants restricting the incurrence of secured debt, sale-leaseback transactions, and significant asset dispositions, alongside typical events of default.

Key Highlights

  • 1Applied Materials issued $1.75 billion in senior unsecured notes across three tranches: 2.650% ($400M, 2016), 4.300% ($750M, 2021), and 5.850% ($600M, 2041).
  • 2Proceeds are intended to fund a portion of the acquisition costs for the proposed merger with Varian Semiconductor Equipment Associates, Inc.
  • 3The notes are due semi-annually on June 15 and December 15, with the first payment on December 15, 2011.
  • 4A key contingency is the potential mandatory redemption of the notes at 101% plus accrued interest if the Varian merger is not consummated by May 31, 2012, or if the merger agreement is terminated.
  • 5The company may be required to repurchase notes upon a change of control and a downgrade below investment grade.
  • 6The indenture includes covenants limiting secured debt, sale-leaseback transactions, and significant asset sales.
  • 7Standard events of default are outlined, including payment failures, covenant breaches, and bankruptcy.

Frequently Asked Questions

The primary purpose of the $1.75 billion in senior unsecured notes is to fund a portion of the consideration and related costs associated with Applied Materials' proposed merger with Varian Semiconductor Equipment Associates, Inc.

If the merger with Varian is not consummated by May 31, 2012, or if the merger agreement is terminated prior to that date, Applied Materials is required to redeem the notes at a redemption price equal to 101% of the aggregate principal amount plus any accrued and unpaid interest.

The notes are issued in three tranches: $400 million of 2.650% senior unsecured notes due 2016, $750 million of 4.300% senior unsecured notes due 2021, and $600 million of 5.850% senior unsecured notes due 2041.

Yes, the indenture contains limited covenants that restrict Applied Materials and its subsidiaries from incurring certain types of secured debt, engaging in sale and lease-back transactions on principal property, and consolidating, merging, or selling all or substantially all of its assets.