Semtech Announces Full Exercise of Greenshoe Option and Closing of Public Offering

Rhea-AI Summary

Semtech (SMTC) has successfully closed its underwritten public offering of 10,496,032 shares of common stock at $63.00 per share, including the full exercise of the underwriters' greenshoe option for an additional 1,369,047 shares. The offering generated gross proceeds of approximately $661 million.

The company plans to use the net proceeds to repay debt under its Third Amended and Restated Credit Agreement. Based on current interest rates, Semtech expects annual cash interest savings of approximately $48 million. The transaction is expected to reduce long-term debt to less than half of the principal outstanding as of the end of fiscal Q3 2025.

Positive

• Raised $661 million in gross proceeds from the public offering
• Expected annual cash interest savings of $48 million
• Significant debt reduction to less than half of principal outstanding
• Full exercise of greenshoe option indicates strong investor demand

Negative

• Substantial shareholder dilution from issuing 10.5 million new shares
• High offering costs including underwriting discounts and commissions

Insights

Financial Analyst

This equity offering marks a significant financial restructuring for Semtech, raising $661 million through the sale of 10.5M shares at $63 per share. The full exercise of the greenshoe option demonstrates strong investor confidence. The strategic debt reduction plan will cut long-term debt by more than 50% from Q3 FY25 levels, resulting in substantial annual interest savings of approximately $48 million. This improved capital structure strengthens Semtech's financial flexibility and aligns with management's strategic priorities. However, the share issuance does create dilution for existing shareholders, which needs to be weighed against the benefits of reduced interest burden and enhanced balance sheet health.

Market Research Analyst

The successful completion of this offering with full greenshoe uptake signals robust institutional investor confidence in Semtech's turnaround strategy. The pricing at $63 per share reflects market acceptance of the company's value proposition. The debt reduction initiative is particularly timely given the current high-interest rate environment, potentially improving Semtech's competitive position in the semiconductor industry. The transaction's focus on balance sheet improvement, portfolio rationalization and margin expansion indicates a comprehensive approach to value creation. This financial restructuring could enhance Semtech's ability to invest in growth initiatives while maintaining operational flexibility.

12/09/2024 - 04:05 PM

CAMARILLO, Calif.--(BUSINESS WIRE)-- Semtech Corporation (Nasdaq: SMTC), a high-performance semiconductor, IoT systems and cloud connectivity service provider (“Semtech” or “Company”), today announced the closing of its underwritten public offering of 10,496,032 shares of its common stock, which includes the full exercise of the underwriters’ option to purchase an additional 1,369,047 shares of its common stock, at a public offering price of $63.00 per share. The gross proceeds to the Company, before deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company, were approximately $661 million.

The Company intends to use the net proceeds from the offering for the repayment of certain indebtedness under the Company’s Third Amended and Restated Credit Agreement, dated September 26, 2022, with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (“Credit Agreement”).

Morgan Stanley and UBS Investment Bank acted as joint book-running managers for the offering.

“This transaction aligns with a key objective of balance sheet improvement and facilitates each of the three CEO near-term priorities to focus our strategy and rationalize our portfolio, accelerate revenue growth and drive margin expansion and promote a high-performance culture through our Semtech Rising initiative,” said Hong Hou, Semtech’s president and chief executive officer. “Semtech’s execution and performance, supported by our employees, suppliers and partners, were foundational to the success of this transaction.”

“We are pleased with investor support of this public offering, which facilitated an increase in transaction size and full exercise of the greenshoe,” said Mark Lin, Semtech’s executive vice president and chief financial officer. “Net proceeds are expected to reduce long-term debt to less than half of the principal outstanding as of the end of our fiscal third quarter of 2025. Based on current interest rates on our Credit Agreement, we expect net proceeds from the offering will result in annual cash interest savings of approximately $48 million.”

The offering was made pursuant to the prospectus included in the Company’s automatically effective shelf registration statement on Form S-3, which was filed with the Securities and Exchange Commission (the “SEC”) on December 4, 2024, and related prospectus supplement. Copies of the prospectus and prospectus supplement related to the offering may be obtained from Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, 2nd Floor, New York, NY 10014, or by telephone at (866) 718-1649, or by e-mail at prospectus@morganstanley.com; or UBS Securities LLC, Attention: Prospectus Department, 1285 Avenue of the Americas, New York, NY 10019, or by telephone at (888) 827-7275.

This press release does not constitute an offer to sell, or the solicitation of an offer to buy, these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Forward-Looking and Cautionary Statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on the Company’s current expectations, estimates and projections about its operations, industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements are statements other than historical information or statements of current condition and include statements regarding the anticipated use of proceeds from the offering; and expected annual cash interest savings. Statements containing words such as “may,” “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “should,” “could,” “will,” “designed to,” “projections,” or “business outlook,” or other similar expressions constitute forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the anticipated use of proceeds from the offering; the estimated cash interest savings realized from the anticipated use of the net proceeds from the offering; the Company’s ability to comply with, or pursue business strategies due to the covenants under the agreements governing its indebtedness; the Company’s ability to forecast and achieve anticipated net sales and earnings estimates in light of periodic economic uncertainty; downturns in the business cycle; and decreasing average selling prices of the Company’s products. Additionally, forward-looking statements should be considered in conjunction with the cautionary statements contained in the risk factors disclosed in the Company’s filings with the SEC, including the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2024, which was filed with the SEC on March 28, 2024, as such risk factors may be amended, supplemented or superseded from time to time by subsequent reports the Company files with the SEC. There may be other factors not presently known to the Company or which it currently considers to be immaterial that could cause the Company’s actual results to differ materially from those projected in any forward-looking statements the Company makes. In light of the significant risks and uncertainties inherent in the forward-looking information included herein that may cause actual performance and results to differ materially from those predicted, any such forward-looking information should not be regarded as representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information contained herein, which reflect management’s analysis only as of the date hereof. Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statements that may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.

About Semtech

Semtech Corporation (Nasdaq: SMTC) is a high-performance semiconductor, IoT systems and cloud connectivity service provider dedicated to delivering high-quality technology solutions that enable a smarter, more connected and sustainable planet. Our global teams are committed to empowering solution architects and application developers to develop breakthrough products for the infrastructure, industrial and consumer markets. To learn more about Semtech technology, visit us at Semtech.com or follow us on LinkedIn or X.

Semtech and the Semtech logo are registered trademarks or service marks of Semtech Corporation or its subsidiaries.

SMTC-F

View source version on businesswire.com: https://www.businesswire.com/news/home/20241209707790/en/

Sara Kesten

Semtech Corporation

(805) 480-2004

webir@semtech.com

Source: Semtech Corporation

FAQ

How much did Semtech (SMTC) raise in its latest public offering?

Semtech raised approximately $661 million in gross proceeds through the public offering of 10,496,032 shares at $63.00 per share.

What is the expected annual interest savings for Semtech (SMTC) from this offering?

Semtech expects to achieve annual cash interest savings of approximately $48 million based on current interest rates.

How will Semtech (SMTC) use the proceeds from its 2024 public offering?

Semtech will use the net proceeds to repay certain indebtedness under its Third Amended and Restated Credit Agreement.

How many additional shares were issued through the greenshoe option for SMTC?

The underwriters exercised their full greenshoe option to purchase an additional 1,369,047 shares.