ITASCA, Ill.--(BUSINESS WIRE)--Apr. 28, 2016--
Knowles Corporation (NYSE: KN) today announced the pricing of $150
million aggregate principal amount of convertible senior notes due 2021
(the "notes") in a private placement to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Act"). The size of the offering was increased by $25 million from the
previously announced offering size of $125 million. Knowles also granted
the initial purchasers of the notes a 30-day option to purchase up to an
additional $22.50 million aggregate principal amount of the notes. The
sale of the notes to the initial purchasers is expected to settle on May
4, 2016, subject to customary closing conditions, and is expected to
result in approximately $144.25 million in net proceeds to Knowles after
deducting the initial purchasers' discount and estimated offering
expenses payable by Knowles (assuming no exercise of the initial
purchasers' option). J.P. Morgan is acting as sole book-running manager
and BofA Merrill Lynch is acting as joint lead manager for the offering.
The notes will be unsecured, senior obligations of Knowles and will bear
interest at a rate of 3.25% per year. Interest will be payable
semi-annually in arrears on May 1 and November 1 of each year, beginning
on November 1, 2016. The notes will mature on November 1, 2021, unless
earlier repurchased or converted. Conversions of the notes will be
settled in cash, shares of Knowles' common stock or a combination
thereof, at Knowles' election.
Knowles expects to use $4.68 million of the net proceeds of the offering
of the notes to pay the cost of the convertible note hedge transactions
described below (after such cost is partially offset by the proceeds to
Knowles from the warrant transactions described below) and to use the
remaining proceeds of the offering to reduce borrowings outstanding
under Knowles’ term loan facility.
The initial conversion rate for the notes is 54.2741 shares of Knowles’
common stock per $1,000 principal amount of notes (which is equivalent
to an initial conversion price of approximately $18.42 per share). Prior
to the close of business on the business day immediately preceding
August 1, 2021, the notes will be convertible at the option of the
noteholders only upon the satisfaction of specified conditions and
during certain periods. Thereafter until the close of business on the
second scheduled trading day immediately preceding the maturity date,
the notes will be convertible at the option of the noteholders at any
time regardless of these conditions. The last reported sale price of
Knowles' common stock on April 28, 2016 was $13.40 per share.
In connection with the pricing of the notes, Knowles entered into
privately negotiated convertible note hedge transactions with affiliates
of three of the initial purchasers (the "option counterparties").
Knowles also entered into warrant transactions with the option
counterparties. The convertible note hedge transactions are expected
generally to reduce the potential dilution to Knowles’ common stock upon
any conversion of the notes and/or offset any cash payments Knowles is
required to make in excess of the principal amount of converted notes,
as the case may be, in the event that the market price per share of
Knowles’ common stock is greater than the strike price of those
convertible note hedge transactions, which initially corresponds to the
initial conversion price of the notes. However, the warrant transactions
will separately have a dilutive effect to the extent that the market
price per share of Knowles’ common stock exceeds the strike price of the
warrants. The strike price of the warrants will initially be
approximately $21.11 per share, which represents a premium of
approximately 57.50% over the last reported sale price of Knowles'
common stock on April 28, 2016, and is subject to certain adjustments
under the terms of the warrant transactions. If the initial purchasers
exercise their option to purchase additional notes, Knowles expects to
enter into additional privately negotiated convertible note hedge
transactions and additional warrant transactions with the option
counterparties.
In connection with establishing their initial hedges of the convertible
note hedge and warrant transactions, Knowles has been advised that the
option counterparties or their respective affiliates expect to enter
into various derivative transactions with respect to Knowles’ 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 Knowles' common stock or the notes at that time, and
could result in a higher effective conversion price for the notes. In
addition, Knowles has been advised that the option counterparties or
their respective affiliates may modify their hedge positions by entering
into or unwinding derivatives with respect to Knowles’ common stock
and/or by purchasing or selling shares of Knowles’ common stock or other
securities of Knowles 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 relating to a conversion
of the notes). This activity could also cause or avoid an increase or a
decrease in the market price of Knowles’ common stock or the notes,
which could affect the ability of noteholders to convert the notes and,
to the extent the activity occurs during any observation period related
to a conversion of the notes, it could affect the number of shares and
value of the consideration that noteholders will receive upon conversion
of the notes. The convertible note hedge transactions and warrant
transactions have not been, and will not be, registered under the Act or
the securities laws of any other jurisdiction and, unless so registered,
may not be offered or sold in the United States except pursuant to an
exemption from such registration requirements.
The notes were offered to qualified institutional buyers pursuant to
Rule 144A under the Act. Neither the notes nor the shares of common
stock issuable upon conversion of the notes, if any, have been, nor will
be, registered under the Act or the securities laws of any other
jurisdiction, and unless so registered, may not be offered or sold in
the United States except pursuant to an exemption from such registration
requirements.
This announcement is neither an offer to sell nor a solicitation of an
offer to buy any of these securities and shall not constitute an offer,
solicitation, or sale in any jurisdiction in which such offer,
solicitation, or sale is unlawful.
Forward Looking Statements
This announcement contains forward-looking statements within the meaning
of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. The words “expect,” “anticipate,”
“intend,” “could,” “may,” “will” and similar expressions, among others,
generally identify forward-looking statements, which speak only as of
the date the statements were made. These forward-looking statements
include statements relating to, among other things, the expected
settlement date of the notes, the expected net proceeds from the sale of
the notes, and the expected use of such proceeds. These statements
involve risks and uncertainties that may cause results to differ
materially from the statements made herein, including those identified
in our Annual Report on Form 10-K for the fiscal year ended December 31,
2015, subsequent Reports on Forms 10-Q and 8-K and our other filings we
make with the Securities and Exchange Commission. Knowles disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160428007098/en/
Source: Knowles Corporation
Media Contact:
Roxanne Pipitone
Knowles Communications
Phone:
(630) 238-5257
Email: roxanne.pipitone@knowles.com
or
Investors
Contact:
Mike Knapp
Knowles Investor Relations
Phone:
(630) 238-5236
Email: mike.knapp@knowles.com