Summary
Lam Research Corporation (LRCX) announced on May 6, 2011, the pricing of a significant private offering of $750 million in aggregate principal amount of convertible senior notes. This offering was increased from the initially announced $700 million. The notes are split into two tranches: $375 million due in May 2016 and $375 million due in May 2018, with annual interest rates of 0.50% and 1.25%, respectively. These notes are senior unsecured obligations and will be sold to qualified institutional buyers. The company has also granted an option to purchase an additional $75 million in notes to cover over-allotments, further increasing the potential capital raised. The primary use of the net proceeds, estimated at approximately $735.5 million after expenses, will be to repurchase approximately 1 million shares of common stock at the May 5, 2011 closing price of $47.56 per share. The remainder of the proceeds will be allocated for general corporate purposes, including working capital, capital expenditures, potential acquisitions, and further share repurchases under existing programs. The company has also engaged in convertible note hedge and warrant transactions to mitigate potential dilution from the convertible notes.
Key Highlights
- 1Lam Research priced a $750 million offering of convertible senior notes, an increase from the previously announced $700 million.
- 2The offering is comprised of two tranches: $375 million in notes due May 2016 and $375 million in notes due May 2018.
- 3The notes carry relatively low interest rates: 0.50% for the 2016 notes and 1.25% for the 2018 notes.
- 4The initial conversion price is approximately $63.02 per share, representing a significant premium (32.5%) over the May 5, 2011 closing stock price of $47.56.
- 5A substantial portion of the net proceeds (estimated at $735.5 million) will be used to repurchase approximately 1 million shares of common stock.
- 6The company entered into convertible note hedge and warrant transactions to manage potential equity dilution.
- 7The remaining proceeds are earmarked for general corporate purposes, including working capital, capital expenditures, and potential M&A activities.