Zoetis Launches Proposed $1.75 Billion Offering of Convertible Senior Notes
Zoetis Inc. today announced that, subject to market conditions, it intends to offer $1.75 billion aggregate principal amount of convertible senior notes due 2029 (the “Notes”) in a private offering to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). Zoetis also intends to grant the initial purchasers of the Notes an option to purchase, for settlement within a 13-day period beginning on, and including, the date on which the Notes are first issued, up to an additional $250 million aggregate principal amount of Notes.
Zoetis intends to use the net proceeds from the offering (i) to fund the cost of the capped call transactions described below; (ii) to purchase shares of Zoetis’ common stock, par value $0.01 per share, in privately negotiated transactions entered into concurrently with the pricing of the offering effected with or through one of the initial purchasers or its affiliate; and (iii) the remainder for additional repurchases of shares of Zoetis’ common stock after the offering, which the Company expects to complete by no later than the first quarter of 2026.
If the initial purchasers exercise their option to purchase additional Notes, Zoetis expects to use a portion of the net proceeds from the sale of the additional Notes to enter into additional capped call transactions, and to use the remainder of such net proceeds for additional repurchases of common stock following the date of the offering.
All share repurchases will be conducted pursuant to the Company’s existing $6 billion share repurchase program, may be made on the open market or in privately negotiated transactions and may be made pursuant to a Rule 10b5-1 plan or otherwise.The Notes will be senior, unsecured obligations of Zoetis, will accrue interest payable semi-annually in arrears and will mature on June 15, 2029, unless earlier redeemed, repurchased or converted.
Upon any conversion of the Notes, Zoetis 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 Zoetis’ common stock or a combination of cash and shares of Zoetis’ common stock, at Zoetis’ election, in respect of the remainder, if any, of Zoetis’ conversion obligation in excess of the aggregate principal amount of the Notes being converted.
The interest rate, the initial conversion rate and certain other terms of the Notes will be determined at the time of pricing of the offering.
In connection with the pricing of the Notes, Zoetis expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers of the Notes or their respective affiliates and/or other financial institutions (the “option counterparties”). The capped call transactions will cover, subject to anti-dilution adjustments, the number of shares of Zoetis’ common stock initially underlying the Notes.
The capped call transactions are expected generally to reduce potential dilution to Zoetis’ common stock upon any conversion of Notes and/or offset any cash payments Zoetis is required to make in excess of the principal amount of any converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
Zoetis has been advised that the option counterparties or their respective affiliates, in connection with establishing their initial hedges of the capped call transactions, expect to purchase shares of Zoetis’ common stock and/or enter into various derivative transactions with respect to Zoetis’ 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 Zoetis’ 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 Zoetis’ common stock and/or purchasing or selling Zoetis’ common stock or other securities of in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes
(and are likely to do so (x) during any observation period related to a conversion of Notes or following any repurchase of Notes in connection with any “fundamental change” or “optional redemption” (each as defined in the indenture for the Notes) and (y) following any other repurchase of Notes if elects to unwind a portion of the capped call transactions in connection with such repurchase).
This activity could also cause or avoid an increase or decrease in the market price of 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 Notes, it could affect the amount and value of the consideration that noteholders will receive upon conversion of the Notes.
In addition, the concurrent repurchases of shares of common stock described above may result in Zoetis’ common stock trading at prices that are higher than would be the case in the absence of these repurchases, which may result in a higher initial conversion price for the Notes.
Neither the Notes nor the shares of common stock potentially issuable upon conversion of the Notes, if any, have been, or will be, registered under the Securities Act, the securities laws of any other jurisdiction or any state securities laws and, unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws. The Notes will be offered and sold only to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act.
This news release is for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, the Notes, nor shall there be any sale of the Notes in any state or jurisdiction in which such offer, solicitation or sale is unlawful. No assurance can be made that the offering will be consummated on its proposed terms or at all.
Source Link: https://news.zoetis.com/
