SMART Global Holdings, Inc. (“SGH,” “we” or the “Company”)
(Nasdaq: SGH) today announced the pricing of $175.0 million in
aggregate principal amount of convertible senior notes due 2030
(the “Notes”) to be offered and sold to qualified institutional
buyers as defined in Rule 144A under the Securities Act of 1933, as
amended (the “Securities Act”). The aggregate principal amount of
the offering was increased from the previously announced offering
size of $150.0 million. The Company has granted the initial
purchasers of the Notes an option to purchase, for settlement
within a period of 13 days from, and including, the date the Notes
are first issued, up to an additional $25.0 million aggregate
principal amount of Notes. The offering is expected to close on or
about August 6, 2024, subject to customary closing conditions.
The Notes will be senior, unsecured obligations of the Company
and will accrue interest at a rate of 2.00% per year, payable
semi-annually in arrears on February 15 and August 15 of each year,
beginning on February 15, 2025. The Notes will mature on August 15,
2030, unless earlier converted, redeemed or repurchased. Prior to
February 15, 2030, the Notes will be convertible at the option of
the holders only upon satisfaction of certain conditions and during
certain periods. On or after February 15, 2030, the Notes will be
convertible at the option of the holders at any time prior to the
close of business on the second scheduled trading day immediately
before the maturity date. The Company will settle conversions by
paying or delivering, as applicable, cash and, if applicable,
ordinary shares, based on the applicable conversion rate(s). The
initial conversion rate of the Notes is 35.7034 ordinary shares per
$1,000 principal amount of Notes (which is equivalent to an initial
conversion price of approximately $28.01 per share and represents a
conversion premium of approximately 30% above the closing price of
the Company’s ordinary shares on August 1, 2024, which was $21.545
per share). The conversion rate is subject to adjustment upon the
occurrence of certain events.
The Notes will be redeemable, in whole or in part, for cash at
SGH’s option at any time, and from time to time, on or after August
20, 2027 and on or before the 31st scheduled trading day
immediately before the maturity date, but only if the last reported
sale price per ordinary share of the Company exceeds 130% of the
conversion price for a specified period of time. In addition, the
Notes will be redeemable, in whole and not in part, at SGH’s option
at any time in connection with certain changes in tax law. The
redemption price will be equal to the principal amount of the Notes
to be redeemed, plus accrued and unpaid interest, if any, to, but
excluding, the redemption date.
If certain corporate events that constitute a “fundamental
change” (as defined in the indenture for the Notes) occur, then,
subject to a limited exception, noteholders may require SGH to
repurchase their Notes for cash. The repurchase price will be equal
to the principal amount of the Notes to be repurchased, plus
accrued and unpaid interest, if any, to, but excluding, the
applicable repurchase date.
SGH estimates that the net proceeds from the offering will be
approximately $168.7 million (or approximately $193.0 million if
the initial purchasers fully exercise their option to purchase
additional Notes), after deducting the initial purchasers’
discounts and commissions and estimated offering expenses.
SGH expects to use (i) approximately $14.3 million of the net
proceeds to fund the cost of entering into the capped call
transactions described below and (ii) approximately $100.6 million
of the net proceeds from the offering to repurchase up to
approximately $80 million aggregate principal amount of SGH’s
existing 2.25% convertible senior notes due 2026 (the “Existing
Convertible Notes”) in privately negotiated transactions effected
through one of the initial purchasers or its affiliate, as SGH’s
agent, concurrently with the pricing of the offering. SGH intends
to use the remainder of the net proceeds from the offering to repay
certain amounts outstanding under SGH’s term loan credit facility,
dated as of February 7, 2022, among the Company, SMART Modular
Technologies, Inc., a wholly-owned subsidiary of SGH, the lenders
party thereto, Citizens Bank, N.A., as administrative agent and
collateral agent and the other parties thereto, as amended (the
“Credit Agreement”).
If the initial purchasers exercise their option to purchase
additional Notes, SGH intends to use a portion of the net proceeds
from the sale of the additional Notes to pay the cost of additional
capped call transactions, and any remaining net proceeds from the
sale of the additional Notes will be used to repay additional
amounts under SGH’s Credit Agreement, as described above.
Holders of the Existing Convertible Notes that are repurchased
in the concurrent repurchases described above may purchase ordinary
shares of the Company in the open market to unwind any hedge
positions they may have with respect to the Existing Convertible
Notes. These activities may affect the trading price of SGH’s
ordinary shares and the initial conversion price of the Notes SGH
is offering.
In connection with the pricing of the Notes, the Company has
entered into privately negotiated capped call transactions with an
affiliate of one of the initial purchasers and certain other
financial institutions (the “Option Counterparties”). The capped
call transactions will cover, subject to anti-dilution adjustments
substantially similar to those applicable to the Notes, the number
of the Company’s ordinary shares that will initially underlie the
Notes. If the initial purchasers exercise their option to purchase
additional Notes, the Company expects to enter into additional
capped call transactions with the Option Counterparties.
The cap price of the capped call transactions will initially be
approximately $37.70 per share, which represents an approximately
75% premium over the closing price of the Company’s ordinary shares
on August 1, 2024, and is subject to certain adjustments under the
terms of the capped call transactions.
The capped call transactions are expected generally to reduce
the potential dilution to holders of ordinary shares of the Company
upon any conversion of the Notes and/or offset any cash payments
SGH is required to make in excess of the principal amount of
converted Notes, as the case may be, with such reduction and/or
offset subject to a cap based on the cap price of the capped call
transactions.
In connection with establishing their initial hedge positions
with respect to the capped call transactions, the Option
Counterparties and/or their respective affiliates expect to
purchase ordinary shares and/or enter into various derivative
transactions with respect to the ordinary shares concurrently with,
or shortly after, the pricing of the Notes. These hedging
activities could increase (or reduce the size of any decrease in)
the market price of the ordinary shares or the Notes at that
time.
In addition, the Option Counterparties and/or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivative transactions with respect to the
ordinary shares and/or purchasing or selling the ordinary shares or
other securities of the Company in secondary market transactions
following the pricing of the Notes and prior to the maturity of the
Notes (and are likely to do so during any observation period
related to a conversion of the Notes). This activity could also
cause or avoid an increase or a decrease in the market price of the
ordinary shares or the Notes, which could affect the ability of
holders to convert their Notes, and, to the extent the activity
occurs following conversion or during any observation period
related to a conversion of the Notes, it could affect the amount
and value of the consideration that holders will receive upon
conversion of their Notes.
The offer and sale of the Notes and the ordinary shares issuable
upon conversion of the Notes, if any, have not been and will not be
registered under the Securities Act or the securities laws of any
other jurisdiction and may not be offered or sold in the United
States absent registration or an applicable exemption from such
registration requirements.
This press release shall not constitute an offer to sell or a
solicitation of an offer to purchase any of these securities, in
the United States or elsewhere, and shall not constitute an offer,
solicitation or sale of the Notes or ordinary shares of the Company
in any state or jurisdiction in which such an offer, solicitation
or sale would be unlawful. This press release does not constitute
an offer to purchase or a notice of redemption with respect to the
Existing Convertible Notes, and SGH reserves the right to elect not
to proceed with the repurchase.
Use of Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act, Section 21E of
the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995. All statements contained
in this press release that do not relate to matters of historical
fact should be considered forward-looking statements. These
statements include, but are not limited to, statements regarding
the completion of the offering of the Notes, the expected amount
and intended use of the net proceeds from the offering, including
the repurchase transactions described above, and the effects of
entering into the capped call transactions and the actions of the
Option Counterparties and their respective affiliates.
Forward-looking statements often use words such as “anticipate,”
“target,” “expect,” “estimate,” “intend,” “plan,” “believe,”
“could,” “will,” “may” and other words of similar meaning. These
forward-looking statements are based on current expectations and
preliminary assumptions that are subject to factors and
uncertainties that could cause actual results to differ materially
from those described in these forward-looking statements. These
forward-looking statements are subject to a number of risks,
uncertainties and other factors, many of which are outside SGH’s
control, including, among others, failure to realize opportunities
relating to the company’s growth and stakeholder value, whether the
offering will be consummated, including the satisfaction of the
closing conditions related to the offering, whether the capped call
transactions will become effective and other factors and risks
detailed in SGH’s filings with the U.S. Securities and Exchange
Commission (which include SGH’s most recent Annual Report on Form
10-K), including SGH’s future filings. Such factors and risks as
outlined above and in such filings do not constitute all factors
and risks that could cause actual results of SGH to be materially
different from SGH’s forward-looking statements. Accordingly,
investors are cautioned not to place undue reliance on any
forward-looking statements. These forward-looking statements are
made as of the date of this press release, and SGH does not intend,
and has no obligation, to update or revise any forward-looking
statements in order to reflect events or circumstances that may
arise after the date of this press release, except as required by
law.
About SGH
At SGH, we design, build, deploy and manage high-performance,
high-availability enterprise solutions that help our customers
solve for the future. Across our computing, memory, and LED lines
of business, we focus on serving our customers by providing deep
technical knowledge and expertise, custom design engineering,
build-to-order flexibility and a commitment to best-in-class
quality.
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version on businesswire.com: https://www.businesswire.com/news/home/20240801383084/en/
Investor Contact Suzanne Schmidt Investor Relations
+1-510-360-8596 ir@sghcorp.com PR Contact Maureen O’Leary
Director, Communications +1-602-330-6846 pr@sghcorp.com
SMART Global (NASDAQ:SGH)
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