Itron Prices Upsized $700 Million 1.375% Convertible Senior Notes Offering
Itron (NASDAQ: ITRI) has announced the pricing of its $700 million offering of 1.375% convertible senior notes due 2030, upsized from $500 million. The notes, aimed at qualified institutional buyers, will mature on July 15, 2030, unless converted, redeemed, or repurchased earlier. They will accrue interest biannually starting January 2025 and have a conversion rate of 7.6199 shares per $1,000 principal amount, equating to a $131.24 per share conversion price. Proceeds, estimated at $681.1 million, will fund capped call transactions, share repurchases, debt repayment, and general corporate purposes. The company has granted initial purchasers an option to buy an additional $105 million in notes.
- Upsized offering: Increased from $500 million to $700 million, indicating strong demand.
- Low interest rate: Notes accrue interest at just 1.375% per annum.
- High initial conversion premium: 27.5% over the last reported sale price of $102.93 per share.
- Strategic use of proceeds: Funding capped call transactions, debt repayment, and share repurchases.
- Potential to reduce dilution: Capped call transactions can mitigate stock dilution from note conversions.
- Potential dilution: Notes conversion could dilute existing shareholders.
- Cost of capped call transactions: Approximately $94.8 million from proceeds used for capped call transactions.
- Debt load: Increasing debt by issuing $700 million in notes.
- Market price dependency: Note conversions and stock repurchases could cause market price fluctuations.
Insights
Itron's move to increase its convertible senior notes offering from
The conversion price of
The use of proceeds is also noteworthy. $100 million will be used to repurchase shares, which can support the stock price by reducing shares outstanding. Additionally, funds may be used for strategic acquisitions or to retire existing debt, which can strengthen the balance sheet and potentially improve future earnings.
The decision to initiate capped call transactions is a strategic one. These transactions limit dilution risk upon note conversion by setting an upper cap on the stock price, initially
However, these transactions can also lead to market volatility. The requirement for the counterparties to hedge their positions through derivative transactions or open market purchases can cause fluctuations in the stock price. Retail investors should be aware of this potential short-term price impact, which might not necessarily reflect the company's performance.
Itron's convertible notes offering, particularly with its upsized nature, reflects a strategic move to leverage current market conditions and investor appetite. By using the proceeds for potential strategic transactions and acquisitions, Itron is keeping its options open for growth through external opportunities. This flexibility is important for adapting to dynamic market conditions and should be seen as a proactive stance in a competitive landscape.
While no specific strategic acquisitions are currently planned, having a war chest ready provides Itron with the agility to act swiftly if an attractive opportunity arises. This approach aligns with long-term value creation, although it carries execution risks depending on how these funds are eventually deployed.
LIBERTY LAKE, Wash., June 17, 2024 (GLOBE NEWSWIRE) -- Itron, Inc. (NASDAQ: ITRI) (the “Company”), which is innovating new ways for utilities and cities to manage energy and water, today announced the pricing of its private offering of
The Notes will accrue interest at a rate of
In addition, the Notes will be redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after July 20, 2028 and prior to April 15, 2030, but only if the last reported sale price per share of the Company’s common stock exceeds
In connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions with certain of the initial purchasers or their affiliates and other financial institutions (the “Capped Call Counterparties”). The capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the Notes and/or offset the cash payments the Company 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 of the common stock is greater than the strike price of the capped call transactions, which initially corresponds to the initial conversion price of the relevant Notes. If, however, the market price per share of the Company’s 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 will initially be
The Company expects that, in connection with establishing their initial hedge of the capped call transactions, the Capped Call Counterparties or their respective affiliates may enter into various derivative transactions with respect to the common stock concurrently with, or shortly after, the pricing of the Notes, and may unwind these various derivative transactions and purchase shares of common stock in open market transactions shortly after the pricing of the Notes. These activities could increase (or reduce the size of any decrease in) the market price of the common stock or the Notes at that time. In addition, the Company expects that the Capped Call Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding derivative transactions with respect to the common stock and/or by purchasing or selling shares of the common stock or other securities of the Company in secondary market transactions following the pricing of the Notes and prior to the maturity date of the Notes (and (i) are likely to do so during any observation period related to a conversion of Notes or following redemption of the Notes by the Company or following any repurchase of the Notes by the Company in connection with any fundamental change and (ii) are likely to do so following any repurchase of the Notes by the Company other than in connection with any such redemption or fundamental change if the Company 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 the 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, could affect the amount and value of the consideration that noteholders will receive upon conversion of the Notes.
The Company estimates that the net proceeds from the offering of Notes will be approximately
The Notes will be offered to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act. The Notes have not been, and will not be, registered under the Securities Act, or the securities laws of any state or other jurisdiction, and, unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the Notes and shall not constitute an offer, solicitation or sale in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration and qualification under the securities laws of such state or jurisdiction.
About Itron
Itron is a proven global leader in energy, water, smart city, IIoT and intelligent infrastructure services. For utilities, cities and society, we build innovative systems, create new efficiencies, connect communities, encourage conservation and increase resourcefulness. By safeguarding our invaluable natural resources today and tomorrow, we improve the quality of life for people around the world.
Itron® is a registered trademark of Itron, Inc. All third-party trademarks are property of their respective owners and any usage herein does not suggest or imply any relationship between Itron and the third party unless expressly stated.
Cautionary Note Regarding Forward Looking Statements
This release contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical factors nor assurances of future performance. These statements are based on our expectations about, among others, revenues, operations, financial performance, earnings, liquidity, earnings per share, cash flows and restructuring activities including headcount reductions and other cost savings initiatives. This document reflects our current strategy, plans and expectations and is based on information currently available as of the date of this release. When we use words such as “expect”, “intend”, “anticipate”, “believe”, “plan”, “goal”, “seek”, “project”, “estimate”, “future”, “strategy”, “objective”, “may”, “likely”, “should”, “will”, “will continue”, and similar expressions, including related to future periods, they are intended to identify forward-looking statements. Forward-looking statements rely on a number of assumptions and estimates. Although we believe the estimates and assumptions upon which these forward-looking statements are based are reasonable, any of these estimates or assumptions could prove to be inaccurate and the forward-looking statements based on these estimates and assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors. Therefore, you should not rely on any of these forward-looking statements. Some of the factors that we believe could affect our results include our ability to execute on our restructuring plan, our ability to achieve estimated cost savings, the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, adverse impacts of litigation, changes in laws and regulations, our dependence on new product development and intellectual property, future acquisitions, changes in estimates for stock-based and bonus compensation, increasing volatility in foreign exchange rates, international business risks, uncertainties caused by adverse economic conditions, including, the factors that are more fully described in Part I, Item 1A: Risk Factors included in our latest Annual Report on Form 10-K filed with the SEC. Itron undertakes no obligation to update or revise any information in this press release.
For additional information, contact:
Itron, Inc.
Paul Vincent
Vice President, Investor Relations
512-560-1172
David Means
Director, Investor Relations
737-242-8448
Investors@itron.com
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