Integrated Device Technology adds outright on debut; Allergan active, trades in line

By Rebecca Melvin

New York, Oct. 30 – Integrated Device Technology Inc.’s newly priced 0.875% convertibles traded up on an outright basis on their debut in the secondary market on Friday.

The seven-year notes of the San Jose, Calif.-based communications semiconductor company were quoted at 103.65 bid, 104.125 offered with the underlying shares at $25.25, which was a gain of 3.8% in the stock.

The bonds had pushed up strongly out of the chute, but came in somewhat around midday, before edging up a little more with the rise in the shares.

Elsewhere, Allergan plc’s mandatory preferreds continued to trade actively in a continuation of action from Thursday on news of a potential purchase of Allergan by New York-based Pfizer Inc.

The Allergan mandatories were trading in line with the underlying shares, a New York-based trader said.

The Allergan shares were up about 3% from Thursday’s close. On Thursday, the Allergan mandatories were quoted at 104.5 versus an underlying share price of $310.00.

LinkedIn Corp.’s 0.5% convertibles were trading after an earnings beat and Rovi Corp.’s 0.5% convertibles continued to trade actively a day after that company’s earnings miss.

The Rovi convertibles traded at 74.5 versus an underlying share price of $8.69 on Friday. The Rovi shares moved up from that level, which was Thursday’s close. At the end of Thursday, the stock was down 23% after the Santa Clara, Calif.-based software and internet media company reported disappointing quarterly results.

In the broader markets, equities fluctuated on the last trading day of the month. But even as shares climbed during October, liquidity in convertibles was thin as new issuance volume lagged.

“It’s been a difficult year,” a convertibles trader said. He thought that trading volume would remain thin as investors begin to position their portfolios for the first quarter of the new year and an anticipated rise in rates.

Integrated Devices up outright

Integrated Devices’ 0.875% convertibles due 2022 were quoted at 103.65 bid, 104.125 offered with the underlying shares at $25.25, which was up 3.8%.

The Integrated Device bonds were “coming in” a little bit by late morning, quoted at 103 versus an underlying share price of $25.28. But earlier they had been 103.5 bid, with the stock at about $25.00, market sources said.

Shares of the San Jose, Calif. -based communications semiconductor company were last at $25.50, which was up $1.17, or 4.8% on the day.

The bonds priced toward the rich end of talk for the coupon and at the midpoint of talk for the premium.

J.P. Morgan Securities LLC and BofA Merrill Lynch were joint bookrunners of the Rule 144A deal, which has a $48.75 million greenshoe,

The securities are non-callable for life, with no puts.

There is net share settlement and standard takeover protection.

In connection with the pricing of the notes, the company entered into convertible note hedge and warrant transactions, or a call spread. Integrated Device purchased $75 million shares of common stock from initial purchasers of the bonds as part of those transactions.

A portion of proceeds will be used to pay the net cost of the call spread and the bulk of proceeds will be used for further share repurchases. Remaining proceeds are for general corporate purposes.

Mentioned in this article:

Allergan plc NYSE: AGN

Integrated Device Technology Inc. Nasdaq: IDTI

LinkedIn Corp. Nasdaq: LNKD

Rovi Inc. Nasdaq: ROVI

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