Western Digital Corporation (Nasdaq: WDC) (“Western Digital”)
today announced that it has priced its offering of $1.4 billion
aggregate principal amount of convertible senior notes due 2028
(the “notes”), reflecting an increase of $100 million over the
previously announced offering size. Western Digital granted the
initial purchasers an option to purchase, during the 13-day period
beginning on, and including, the first date on which the notes are
issued, up to an additional $200 million principal amount of notes.
The sale of the notes is expected to be completed on November 3,
2023, subject to customary closing conditions.
The notes will be senior unsecured obligations of Western
Digital and will be guaranteed, jointly and severally, on a senior
unsecured basis by each of Western Digital’s wholly-owned
subsidiaries from time to time guaranteeing Western Digital’s 4.75%
senior unsecured notes due 2026 (the “2026 Notes”) (initially,
Western Digital Technologies, Inc.) or that is a guarantor or
obligor with respect to certain refinancing indebtedness with
respect to the 2026 Notes. The notes will bear interest at a rate
of 3.00% per annum, payable semi-annually in arrears on May 15 and
November 15 of each year, beginning on May 15, 2024. The notes will
mature on November 15, 2028, unless earlier repurchased, redeemed
or converted in accordance with their terms.
The notes will have an initial conversion rate of 19.1589 shares
of Western Digital’s common stock per $1,000 principal amount of
the notes (equivalent to an initial conversion price of
approximately $52.20 per share of Western Digital’s common stock).
The initial conversion price represents a premium of approximately
30% to the $40.15 per share closing price of Western Digital’s
common stock on October 31, 2023. Prior to the close of business on
the business day immediately preceding August 15, 2028, the notes
will be convertible at the option of the holders only upon the
occurrence of certain events and during certain periods.
Thereafter, the notes will be convertible at the option of the
holders at any time until the close of business on the second
scheduled trading day immediately preceding the maturity date. Upon
any conversion of the notes, Western Digital will pay cash up to
the aggregate principal amount of the notes to be converted and pay
or deliver, as the case may be, cash, shares of Western Digital’s
common stock or a combination of cash and shares of Western
Digital’s common stock, at Western Digital's election, in respect
of the remainder, if any, of its conversion obligation in excess of
the aggregate principal amount of the notes being converted.
Western Digital will not be permitted to redeem the notes prior
to November 15, 2026. On or after November 15, 2026, Western
Digital may redeem for cash all or any portion of the notes, at its
option, if the last reported sale price of Western Digital’s common
stock has been at least 130% of the conversion price then in effect
for a specified period of time. The redemption price will equal
100% of the principal amount of the notes to be redeemed, plus
accrued and unpaid interest to, but excluding, the redemption date.
Western Digital may not redeem less than all of the outstanding
notes unless at least $150 million aggregate principal amount of
notes are outstanding and not called for redemption as of the time
Western Digital sends the related notice of redemption (and after
giving effect to the delivery of such notice of redemption).
Holders of the notes will be able to require Western Digital to
repurchase their notes following certain corporate transactions at
a repurchase price equal to 100% of the principal amount of the
notes to be repurchased, plus accrued and unpaid interest, if any,
to, but excluding, the repurchase date. Following certain corporate
transactions or if Western Digital issues a notice of redemption,
Western Digital will, in certain circumstances, increase the
conversion rate for a holder that elects to convert its notes in
connection with such corporate transaction or notice of redemption
(if in connection with a notice of redemption, solely with respect
to those notes called for redemption).
Western Digital estimates that the net proceeds from the
offering will be approximately $1,367 million (or approximately
$1,563 million if the initial purchasers exercise their option to
purchase additional notes in full), after deducting the initial
purchasers’ discount and estimated offering expenses payable by
Western Digital. Western Digital will use (1) approximately $135
million of the net proceeds of the offering to pay the cost of
entering into capped call transactions described below, (2)
approximately $507 million of the net proceeds of the offering to
pay the purchase price for the refinancing through private
repurchases of a portion of Western Digital’s existing 1.50%
convertible senior notes due 2024 (the “Existing Convertible
Notes”) as described in the paragraph immediately below, (3) to
repay the remaining principal amount owed on the Existing
Convertible Notes on the maturity date of the Existing Convertible
Notes or prior to such date through further private repurchases,
and (4) after the application of the proceeds in accordance with
clauses (1) – (3) (or, with respect to clause (3), if Western
Digital holds the requisite amount of funds to be used in
accordance with such clause), for general corporate purposes, which
may include repayment or repurchase of certain of Western Digital’s
outstanding non-convertible debt securities through tender offers,
open market or privately negotiated repurchases, redemption or
otherwise or repayment of any of Western Digital’s other
indebtedness.
Contemporaneously with the pricing of the notes in the offering,
Western Digital entered into separate and individually negotiated
transactions with certain holders of Western Digital’s Existing
Convertible Notes to repurchase approximately $508 million in
aggregate principal amount of the Existing Convertible Notes for an
aggregate of approximately $507 million in cash (including accrued
and unpaid interest).
Western Digital expects that counterparties that sell their
Existing Convertible Notes to it as described above and that have
hedged their equity price risk with respect to such Existing
Convertible Notes may enter into or unwind various transactions
with respect to Western Digital’s common stock (including entering
into derivatives with one or more of the initial purchasers in this
offering or their respective affiliates) and/or purchase shares of
Western Digital’s common stock concurrently with or shortly after
the pricing of the notes. This activity could increase (or reduce
the size of any decrease in) the market price of Western Digital’s
common stock, including concurrently with the pricing of the notes,
resulting in a higher effective conversion price of the notes.
Western Digital cannot predict the magnitude of such market
activity or the overall effect it will have on the price of the
notes or Western Digital’s common stock.
In connection with the pricing of the notes, Western Digital
entered into privately negotiated capped call transactions with
certain financial institutions, including one or more of the
initial purchasers or their respective affiliates, as option
counterparties. The capped call transactions will cover, subject to
anti-dilution adjustments, the number of shares of Western
Digital’s common stock initially underlying the notes. The capped
call transactions are expected generally to reduce potential
dilution to Western Digital’s common stock upon conversion of any
notes and to offset any cash payments made in excess of the
principal amount of converted notes, as the case may be, with such
reduction and/or offset subject to a cap. The cap price of the
capped call transactions will initially be $70.2625 per share,
which represents a premium of 75% over the last reported sale price
of Western Digital’s common stock on October 31, 2023 and is
subject to certain adjustments under the terms of the capped call
transactions. If the initial purchasers exercise their option to
purchase additional notes, Western Digital expects to enter into
additional capped call transactions with the option
counterparties.
In connection with establishing their initial hedges of the
capped call transactions, Western Digital expects the option
counterparties or their respective affiliates to purchase shares of
Western Digital’s common stock and/or enter into various
transactions with respect to Western Digital’s common stock
concurrently with or shortly after the pricing of the notes. This
activity could increase (or reduce the size of any decrease in) the
market price of Western Digital’s common stock or the notes at that
time. In addition, the option counterparties or their respective
affiliates may modify their hedge positions by entering into or
unwinding various transactions with respect to Western Digital’s
common stock and/or purchasing or selling Western Digital’s common
stock or other Western Digital securities or instruments in
secondary market transactions following the pricing of the notes
and prior to the maturity of the notes (and (x) are likely to do so
during any observation period related to a conversion of notes or
following any repurchase of notes by Western Digital in connection
with any optional redemption or fundamental change and (y) are
likely to do so following any repurchase of notes by Western
Digital other than in connection with any optional redemption or
fundamental change if Western Digital elects to unwind a
corresponding portion of the capped call transactions in connection
with such repurchase). This activity could also cause or avoid an
increase or a decrease in the market price of Western Digital’s
common stock or the notes.
The notes, the common stock, if any, deliverable upon conversion
of the notes and the related guarantee have not been and will not
be registered under the Securities Act of 1933 or the securities
laws of any other jurisdiction. They were offered in a private
offering only to persons reasonably believed to be qualified
institutional investors in accordance with Rule 144A under the
Securities Act of 1933.
This press release does not constitute an offer to sell or buy
or a solicitation of an offer to buy or sell the notes or any other
security, nor will there be any sale of the notes or any other
security in any state or jurisdiction in which such an offer,
solicitation or sale is not permitted. Any offer or sale will be
made only by means of an offering memorandum, as applicable.
About Western Digital
Western Digital is on a mission to unlock the potential of data
by harnessing the possibility to use it. With Flash and HDD
franchises, underpinned by advancements in memory technologies,
Western Digital creates breakthrough innovations and powerful data
storage solutions that enable the world to actualize its
aspirations.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws, including, without
limitation, statements concerning settlement of the offering, the
intended use of the net proceeds of the offering, expectations
regarding the effect of the capped call transactions and the
Existing Convertible Notes repurchase, expectations regarding
actions of the option counterparties and their respective
affiliates, potential dilution to Western Digital’s common stock,
whether the capped call transactions will become effective and
whether the repurchases of the Existing Convertible Notes will
close. These forward-looking statements are based on management’s
current expectations and are subject to risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements. There can
be no assurance that these forward-looking statements will be
achieved; these statements are not guarantees of future performance
and are subject to certain risks, uncertainties, and other factors,
many of which are beyond Western Digital’s control and are
difficult to predict, including without limitation: volatility in
global economic conditions; future responses to and effects of
global health crises; impact of business and market conditions; the
outcome and impact of Western Digital’s announced intention to
spin-off its flash-based product segment from its hard disk drive
technology business, including with respect to the ultimate form of
any spin-off transaction, customer and supplier relationships,
regulatory and contractual restrictions, stock price volatility and
the diversion of management’s attention from ongoing business
operations and opportunities; impact of competitive products and
pricing; Western Digital’s development and introduction of products
based on new technologies and expansion into new data storage
markets; risks associated with cost saving initiatives,
restructurings, acquisitions, divestitures, mergers, joint ventures
and Western Digital’s strategic relationships; difficulties or
delays in manufacturing or other supply chain disruptions; hiring
and retention of key employees; Western Digital’s level of debt and
other financial obligations; changes to Western Digital’s
relationships with key customers; compromise, damage or
interruption from cybersecurity incidents or other data system
security risks; actions by competitors; risks associated with
compliance with changing legal and regulatory requirements and the
outcome of legal proceedings; and other risks and uncertainties
listed in Western Digital’s filings with the Securities and
Exchange Commission (the “SEC”), including Western Digital’s Annual
Report on Form 10-K filed with the SEC on August 22, 2023, to which
your attention is directed. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
hereof, and Western Digital undertakes no obligation to update or
revise these forward-looking statements to reflect new information
or subsequent events, except as required by law.
Western Digital, the Western Digital logo, SanDisk and WD are
registered trademarks or trademarks of Western Digital Corporation
or its affiliates in the US and/or other countries.
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version on businesswire.com: https://www.businesswire.com/news/home/20231031196747/en/
Investor Contact: T. Peter Andrew 949.672.9655
peter.andrew@wdc.com investor@wdc.com
Media Contact: Media Relations 408.801.0021
WD.Mediainquiries@wdc.com
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