8-KMaterial AgreementsFinancial EventsSecurities & Listing+1

TERADYNE, INC 8-K Report, Material Agreement (Dec 12, 2016)

Filed December 12, 2016For Securities:TER

Summary

Teradyne, Inc. has filed an 8-K report detailing its financing activities through the issuance of senior convertible notes and associated derivative transactions. On December 6, 2016, the company priced a private offering of $400 million in 1.25% Senior Convertible Notes due 2023, which was later increased to $460 million due to the exercise of an over-allotment option by initial purchasers. The net proceeds from this offering, approximately $450.8 million after expenses, are intended for general corporate purposes, including the repurchase of company stock. In conjunction with the note offering, Teradyne entered into convertible note hedge and warrant transactions. The note hedge transactions are designed to mitigate potential dilution and offset cash payments upon conversion of the notes if the stock price increases. Conversely, the warrant transactions, with a higher strike price, could be dilutive to existing shareholders if the stock price exceeds that threshold. These transactions are separate from the notes and do not affect noteholders' rights.

Key Highlights

  • 1Teradyne priced a $400 million offering of 1.25% Senior Convertible Notes due 2023, which was subsequently upsized to $460 million.
  • 2Net proceeds from the offering were approximately $450.8 million, intended for general corporate purposes and further stock repurchases.
  • 3The convertible notes mature on December 15, 2023, with an interest rate of 1.25% per year, payable semi-annually.
  • 4Notes are convertible under specific conditions related to stock price performance or upon certain corporate events, with an initial conversion price of approximately $31.84 per share.
  • 5The company entered into convertible note hedge transactions to mitigate potential dilution from the convertible notes.
  • 6Separate warrant transactions were executed, with a strike price of $39.95, which could be dilutive to shareholders if the stock price exceeds this level.
  • 7The offering and related transactions were conducted through private placements and reliance on exemptions from registration under the Securities Act of 1933.

Frequently Asked Questions

Teradyne issued $460 million in aggregate principal amount of 1.25% Senior Convertible Notes due 2023.

The net proceeds, approximately $450.8 million after deducting offering expenses, will be used for general corporate purposes, which include repurchasing additional shares of the Company's common stock.

The notes can be converted if the stock price exceeds 130% of the conversion price for a specified period, if the trading price of the notes falls below a certain threshold relative to the stock price, or upon the occurrence of specified corporate events. Holders can also convert anytime after September 15, 2023.

The note hedge transactions are intended to reduce potential dilution. However, the warrant transactions have a strike price of $39.95 and could be dilutive to existing shareholders if Teradyne's stock price exceeds this level, as the company may be required to issue shares to settle these warrants.