NetApp (NASDAQ:NTAP) announced today that it proposes to offer $1.1
billion aggregate principal amount of convertible senior notes, subject
to market conditions and other factors. The notes would be due in 2013
and are to be offered and sold to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended.
NetApp also intends to grant to the initial purchasers of the notes an
option to purchase up to an additional $165 million aggregate principal
amount of notes solely to cover over-allotments.
The notes will be unsecured, unsubordinated obligations of NetApp, and
interest will be payable semi-annually. The notes will be convertible,
subject to certain conditions, into cash up to the principal amount of
the notes and, with respect to any excess conversion value, into shares
of NetApp’s common stock. The interest rate,
conversion rate, offering price and other terms are to be determined by
negotiations between NetApp and the initial purchasers.
NetApp also expects to enter into convertible note hedge transactions
with counterparties, one or more of which may be affiliated with the
initial purchasers of the notes (the “hedge
counterparties”), and intends to use a portion
of the net proceeds from this offering to pay for the convertible note
hedge transactions. NetApp also expects to enter into separate warrant
transactions with the hedge counterparties, and to use the proceeds of
those warrant transactions to partially offset the cost of the
convertible note hedge transactions. NetApp anticipates that the
warrants will have an exercise price that is approximately 70 percent
higher than the closing price of NetApp’s
common stock on the date the warrants are issued. In connection with the
convertible note hedge and warrant transactions, the hedge
counterparties have advised NetApp that they or their affiliates may
enter into various derivative transactions with respect to the common
stock of NetApp and/or purchase common stock of NetApp or other
securities linked to or referencing NetApp’s
common stock concurrently with or shortly after the pricing of the
notes. These activities could have the effect of increasing or
preventing a decline in the price of the common stock of NetApp
concurrently with or after the pricing of the notes. In addition, the
hedge counterparties or their affiliates may from time to time,
following the pricing of the notes, enter into or unwind various
derivative transactions with respect to the common stock of NetApp
and/or purchase or sell common stock of NetApp or other securities
linked to or referencing NetApp’s common stock
in secondary market transactions (and are likely to do so during any
observation period relating to the conversion of the notes). These
activities could have the effect of decreasing the price of the common
stock of NetApp and could adversely affect the price of the notes during
any observation period related to the conversion of notes.
NetApp expects to use (i) up to $275 million of the net proceeds of the
offering to repurchase shares of its common stock in negotiated
transactions with institutional investors, through one or more of the
initial purchasers as its agent, concurrently with the offering, (ii) a
portion of the net proceeds for the cost of the convertible note hedge
transactions described above, after such cost is offset by the proceeds
received from the warrant transactions described above, and (iii) any
remaining net proceeds for general corporate purposes, including capital
expenditures, possible future stock repurchases, working capital and
potential acquisitions and strategic transactions. The repurchase of
such shares in connection with the offering could have the effect of
raising or maintaining the market price of the common stock above levels
that would otherwise have prevailed, or preventing, slowing or delaying
a decline in such price. If the initial purchasers exercise the
over-allotment option, NetApp intends to use any proceeds therefrom to
enter into additional convertible note hedge transactions and for
general corporate purposes, and in such event also intends to enter into
additional warrant transactions, which would result in the receipt of
additional proceeds.
This announcement is neither an offer to sell nor a solicitation of an
offer to buy any of these securities (including the shares of NetApp
common stock into which the notes are convertible) and shall not
constitute an offer, solicitation or sale in any jurisdiction in which
such offer, solicitation or sale is unlawful.
The notes and the shares of common stock issuable upon conversion of the
notes have not been registered under the Securities Act of 1933, as
amended, or any state securities laws and may not be offered or sold in
the United States absent registration or an applicable exemption from
such registration requirements.
Cautionary Statement:
The statements in this release relating to the terms and timing of the
proposed offering and the expected use of proceeds from the offering are
forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. These
statements involve risks and uncertainties that could cause actual
results to differ materially, including, but not limited to, whether or
not NetApp will offer the notes or consummate the offering, the final
terms of the offering, prevailing market conditions, the anticipated
principal amount of the notes which could differ based upon market
conditions, the anticipated use of the proceeds of the offering which
could change as a result of market conditions or for other reasons, the
fact that future share repurchases will depend upon market conditions,
interest rates and corporate considerations and the impact of general
economic, industry or political conditions in the United States or
internationally.
Stockholders of NetApp are cautioned not to place undue reliance on its
forward-looking statements, which speak only as of the date such
statements are made. NetApp does not undertake any obligation to
publicly update any forward-looking statements to reflect events,
circumstances or new information after this June 3, 2008 press release,
or to reflect the occurrence of unanticipated events.
NetApp, the NetApp logo, and Go further, faster, are trademarks or
registered trademarks of NetApp, Inc. in the United States and/or other
countries.
