NetApp greenshoe fully exercised, lifts 1.75% five-year convertibles to $1.27 billion

By Devika Patel

Knoxville, Tenn., June 10 - Underwriters for NetApp Inc.'s 1.75% five-year convertible unsecured, unsubordinated notes exercised their over-allotment option in full for $165 million more of the notes, increasing the size of the issue to $1.265 billion, the company said in an 8-K filed Tuesday with the Securities and Exchange Commission.

As previously reported, NetApp sold the convertibles at par in a Rule 144A deal on June 4 via joint bookrunners Goldman Sachs and Morgan Stanley.

The notes have an initial conversion premium of 35% and a conversion price of $31.85.

They are non-callable, and there are no puts. There is standard dividend and takeover protection and contingent conversion subject to a 130% price hurdle, as well as net share settlement.

With proceeds, NetApp plans to repurchase $273.6 million of stock in negotiated transactions with institutional investors. 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.

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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