PetIQ, Inc. Prices $125 Million Convertible Senior Notes Offering
Rhea-AI Summary
PetIQ (NASDAQ: PETQ) has announced a private offering of $125 million in convertible senior notes due 2026, with a 4.00% annual interest rate. The initial conversion price is approximately $29.65 per share, a 25% premium over the recent share price. Proceeds will primarily fund the Capstar acquisition from Elanco Animal Health and support working capital needs. Additionally, capped call transactions are in place to mitigate potential dilution. The offering is set to settle on May 19, 2020, and includes a 30-day option for purchasers to acquire more notes.
Positive
- Offering of $125 million in convertible senior notes will fund Capstar acquisition.
- Capped call transactions aim to reduce potential dilution of common stock.
- Initial conversion price set at a 25% premium, encouraging investment.
Negative
- Potential share dilution if market prices exceed capped call transaction limits.
- Notes are subject to risks including market conditions and business uncertainties.
News Market Reaction – PETQ
In the trading session that priced this news, PETQ gained 8.39%, reflecting a notable positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
AI-generated analysis. How Rhea-AI works. Not financial advice.
Proceeds to be Used to Fund Capstar Acquisition
Capped Call to Increase Effective Conversion Price to
EAGLE, Idaho, May 14, 2020 (GLOBE NEWSWIRE) -- PetIQ, Inc. (“PetIQ”) (NasdaqGS: PETQ) today announced the pricing of its offering of
The notes will be senior, unsecured obligations of PetIQ and will accrue interest at a rate of
The notes will be redeemable, in whole or in part, for cash at PetIQ’s option at any time, and from time to time, on or after June 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of PetIQ’s Class A common stock exceeds
If a “fundamental change” (as defined in the indenture for the notes) occurs, then, subject to a limited exception, noteholders may require PetIQ 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.
PetIQ estimates that the net proceeds from the offering will be approximately
In connection with the pricing of the notes, PetIQ entered into privately negotiated capped call transactions with one or more dealers, which included one or more 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 shares of PetIQ’s Class A common stock underlying the notes. If the initial purchasers exercise their option to purchase additional notes, PetIQ expects to enter into additional capped call transactions with the option counterparties.
The capped call transactions are expected generally to reduce the potential dilution to PetIQ's Class A common stock upon any conversion of the notes and/or offset any potential cash payments PetIQ is required to make in excess of the principal amount of converted notes, as the case may be, upon any conversion of the notes. However, if the market price per share of PetIQ's Class A common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions. The cap price of the capped call transactions initially will be
In connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to PetIQ's Class A common stock and/or purchase shares of PetIQ's Class A common stock shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of PetIQ's Class A 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 derivatives with respect to PetIQ's Class A common stock and/or purchasing or selling PetIQ's Class A common stock or other securities 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 notes). This activity could also affect the market price of PetIQ's Class A common stock or the notes, which could affect the ability of noteholders to convert the notes, and, to the extent the activity occurs following conversion or during any observation period related to a conversion of notes, it could affect the number of shares of PetIQ Class A common stock and the value of the consideration that noteholders would receive upon conversion of the notes.
The offer and sale of the notes and any shares of Class A common stock issuable upon conversion of the notes have not been, and will not be, registered under the Securities Act or any other securities laws, and the notes and any such shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the notes or any shares of Class A common stock issuable upon conversion of the notes, nor will there be any sale of the notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.
About PetIQ
PetIQ is a leading pet medication and wellness company delivering a smarter way for pet parents to help their pets live their best lives through convenient access to affordable veterinary products and services. PetIQ engages with customers through more than 60,000 points of distribution across retail and e-commerce channels with its branded distributed medications, which are further supported by its own world-class medications manufacturing facility in Omaha, Nebraska. PetIQ’s national service platform, VIP Petcare, operates in over 3,400 retail partner locations in 41 states providing cost-effective and convenient veterinary wellness services. PetIQ believes that pets are an important part of the family and deserve the best products and care we can give them.
Forward-Looking Statements
This press release includes forward-looking statements, including statements regarding the completion of the offering, the expected amount and intended use of the net proceeds and the effects of entering into the capped call transactions described above. Forward-looking statements represent PetIQ’s current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions, the satisfaction of the closing conditions related to the offering and risks relating to PetIQ’s business, including the impact of COVID-19 on PetIQ’s business and the global economy and the risks set forth under the heading “Risk Factors” in PetIQ’s Annual Report on Form 10-K for the year ended December 31, 2019, Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and other reports filed from time to time with the Securities and Exchange Commission. PetIQ may not consummate the offering described in this press release and, if the offering is consummated, cannot provide any assurances regarding its ability to effectively apply the net proceeds as described above. The forward-looking statements included in this press release speak only as of the date of this press release, and PetIQ does not undertake to update the statements included in this press release for subsequent developments, except as may be required by law.
Contact:
| Investor Relations Contact: | Media Relations Contact: |
| ICR Jeff Sonnek 646-277-1263 jeff.sonnek@icrinc.com | ICR Cory Ziskind 646-277-1232 cory.ziskind@icrinc.com |