MKS Instruments Prices $1.2 Billion Convertible Senior Notes Offering

MKS Instruments announces pricing of $1.2 billion convertible senior notes due 2030, with net proceeds estimated at $1,177.7 million. The company plans to use the funds to repay debt, reduce borrowing costs, and pursue growth strategies in the semiconductor equipment market.

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MKS Instruments Prices $1.2 Billion Convertible Senior Notes Offering

MKS Instruments Prices $1.2 Billion Convertible Senior Notes Offering

MKS Instruments, Inc. (NASDAQ: MKSI) has announced the pricing of its offering of $1.2 billion aggregate principal amount of 1.25% convertible senior notes due 2030. The notes will be offered and sold in a private placement to qualified institutional buyers.

The net proceeds from the offering are estimated to be approximately $1,177.7 million, or $1,374.2 million if the initial purchasers exercise their option to purchase additional notes in full. MKS intends to use approximately $143.52 million of the net proceeds to pay the cost of capped call transactions. The remaining net proceeds will be used to repay approximately $1,034.1 million in borrowings outstanding under its First Lien USD tranche B term loan, together with accrued interest, as well as for general corporate purposes.

Why this matters: This significant financing move by MKS Instruments demonstrates the company's efforts to strengthen its financial position and reduce debt, which can have a positive impact on the overall semiconductor industry. As a leading manufacturer of measuring and controlling devices, MKS Instruments' financial health can influence the production and supply of critical components in the technology sector.

The notes will bear interest at a rate of 1.25% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024. The notes will mature on June 1, 2030, unless earlier converted, redeemed, or repurchased in accordance with their terms. The conversion rate for the notes will initially be 6.4799 shares of MKS common stock per $1,000 principal amount of notes, equivalent to an initial conversion price of approximately $154.32 per share.

In connection with the pricing of the notes, MKS has entered into privately negotiated capped call transactions with the option counterparties. The capped call transactions are expected generally to reduce the potential dilution to MKS common stock upon conversion of any notes and/or offset any cash payments that MKS is required to make in excess of the principal amount of any converted notes. The cap price of the capped call transactions is initially $237.42 per share of MKS common stock, representing a premium of 100% over the last reported sale price of $118.71 per share of MKS common stock on The Nasdaq Global Select Market on May 13, 2024.

MKS Instruments is a leading manufacturer of measuring and controlling devices used in semiconductor manufacturing and other advanced industrial processes. The company recently reported its first quarter 2024 financial results, with revenue increasing 9% year-over-year to $868 million and adjusted earnings per share of $1.18, both exceeding consensus estimates. MKS has a current market capitalization of $8.2 billion based on 67.06 million shares outstanding.

The offering of the convertible senior notes is expected to close on May 16, 2024, subject to satisfaction of customary closing conditions. With the pricing of this $1.2 billion offering, MKS Instruments aims to optimize its capital structure, reduce borrowing costs, and provide additional flexibility to pursue its growth strategies in the semiconductor equipment market.

Key Takeaways

  • MKS Instruments announces $1.2B private offering of 1.25% convertible senior notes due 2030.
  • Net proceeds: $1,177.7M ($1,374.2M if option exercised); to repay debt and for general corporate purposes.
  • Notes bear 1.25% interest, payable semi-annually, and mature on June 1, 2030.
  • Conversion rate: 6.4799 shares of MKS common stock per $1,000 principal amount of notes.
  • Proceeds to strengthen financial position, reduce debt, and pursue growth strategies in semiconductor equipment market.