Western Digital Corporation (Nasdaq: WDC) (“Western Digital”)
today announced a proposed offering of $1.3 billion aggregate
principal amount of convertible senior notes due 2028 (the
“notes”), subject to market and other 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. 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 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. Interest on the notes will be payable semiannually 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. The interest rate,
initial conversion rate, offering price and other terms of the
notes will be determined at the time of pricing the offering.
Western Digital intends to offer the notes 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, as amended (the “Securities Act”). In connection with the
offering, Western Digital expects to grant 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.
Western Digital will use the net proceeds of the notes offering
(1) to pay the cost of entering into capped call transactions in
connection with the offering, (2) 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”), (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 expects to enter into one or more separate and
individually negotiated transactions with one or more holders of
the Existing Convertible Notes to repurchase a portion of the
outstanding Existing Convertible Notes for cash on terms to be
negotiated separately with each holder (each, a “note repurchase”).
The terms of each note repurchase are anticipated to be
individually negotiated with each holder of the Existing
Convertible Notes and will depend on several factors, including the
market price of Western Digital’s common stock and the trading
price of the Existing Convertible Notes at the time of each such
note repurchase. No assurance can be given as to how much, if any,
of the Existing Convertible Notes will be repurchased or the terms
on which they will be repurchased.
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
also 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 certain other financial
institutions, 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. 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 or the securities laws of
any other jurisdiction. They may not be offered or sold in the
United States or to, or for the benefit of, U.S. persons absent
registration under, or an applicable exemption from, the
registration requirements of the Securities Act.
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 the proposed terms of the notes,
completion, timing and size of the offering of the notes, potential
repurchases of Western Digital’s Existing Convertible Notes and
entry into capped call transactions, potential dilution to Western
Digital’s common stock and the intended use of proceeds of the
offering. 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: market
conditions (including the market price of Western Digital’s common
stock and the trading price of the Existing Convertible Notes),
holders’ willingness to sell their Existing Convertible Notes to
Western Digital, 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/20231030720536/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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