NetApp to price $1.1 billion five-year convertibles to yield 1.5%-2%, up 30%-35%

By Rebecca Melvin

New York, June 3 - NetApp Inc. plans to price $1.1 billion of five-year convertible senior unsecured notes after the market close Wednesday with a coupon talked between 1.5% and 2% and an initial conversion premium of 30% to 35%, according to a market source.

The Rule 144A deal is being sold via Goldman Sachs & Co. and Morgan Stanley & Co. Inc.

There is a greenshoe of $165 million.

The notes are non-callable, and there are no puts. There is standard dividend and takeover protection and contingent conversion subject to a 130% price hurdle.

Concurrent with the note offering, NetApp plans to repurchase $275 million of stock. The company also plans to enter into convertible note hedge transactions with counterparties, which will be paid for with a portion of proceeds, offset by separate warrant transactions with the hedge counterparties.

NetApp anticipates that the warrants will have an exercise price that is about 70% 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, counterparties may enter into various stock derivative transactions that could increase or prevent a decline in the price of the common stock.

Any remaining proceeds after the stock repurchase and the note hedge transactions will be earmarked for general corporate purposes, including capital expenditures, possible future stock repurchases, working capital and potential acquisitions and strategic transactions.

Sunnyvale, Calif.-based NetApp is a data storage company.

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