Winnebago Industries Announces Proposed Private Offering of $300 Million of Convertible Senior Notes
- None.
- The offering of convertible senior notes may lead to potential dilution for the company's common stock, and the hedge transactions could have a dilutive effect on the stock's market value.
Insights
Winnebago Industries' announcement of a $300 million convertible senior notes offering, with an option for an additional $45 million, reflects a strategic move to optimize its capital structure. Convertible notes are a form of debt that can be converted into equity, typically at the discretion of the holder, under certain conditions. This flexibility can be attractive to investors seeking both the security of a bond and the upside potential of equity.
From a financial perspective, the convertible notes offering could dilute the equity of existing shareholders if the notes are converted into common stock. However, the company's decision to enter into convertible note hedge transactions suggests a strategy to offset potential dilution. These hedge transactions are financial instruments that, in essence, provide the company with a way to manage the dilution risk by potentially buying back shares at a pre-determined price.
Moreover, the use of proceeds to repurchase the outstanding 1.50% Convertible Senior Notes due 2025 indicates a proactive approach to debt management. This could improve the company's debt profile by extending maturities and potentially reducing interest expenses, assuming the new notes carry a lower interest rate than the 2025 Notes.
The offering could signal confidence to the market, as Winnebago Industries is actively managing its capital to fund future growth initiatives or other corporate needs. The reference to general corporate purposes suggests flexibility in allocating capital, which could be used for a range of activities including research and development, marketing, or expansion into new markets.
However, market reaction to such offerings can be mixed. On one hand, the additional capital raises could be seen as a positive sign of growth and investment. On the other hand, potential dilution and the complex nature of convertible notes could cause uncertainty among investors. The repurchase of the 2025 Notes and the concurrent hedging activities will also need to be closely monitored, as these could impact the company's stock price and the notes' conversion price.
It's important to note the regulatory aspect of this offering. The notes are being offered to qualified institutional buyers under Rule 144A, which allows for the sale of securities to sophisticated investors without the need for a public registration. This expedites the process but limits the pool of potential investors. The absence of registration under the Securities Act means that the securities have restrictions on their resale, which can impact their liquidity and marketability.
Additionally, the company's compliance with state securities laws and the accurate representation in the private offering memorandum are critical to avoid legal complications. Investors must rely on the memorandum's accuracy since the offering is exempt from the standard registration requirements, which typically provide a layer of investor protection.
EDEN PRAIRIE, Minn., Jan. 17, 2024 (GLOBE NEWSWIRE) -- Winnebago Industries, Inc. (NYSE: WGO) (the “Company”), a leading outdoor lifestyle product manufacturer, today announced its intention to offer, subject to market conditions and other factors,
Final terms of the notes, including the initial conversion price, interest rate and certain other terms of the notes will be determined at the time of pricing. The notes will bear interest semi-annually and will mature on January 15, 2030, unless repurchased, redeemed or converted in accordance with their terms prior to such date. Prior to July 15, 2029, the notes will be convertible only upon satisfaction of certain conditions and during certain periods, and on and after July 15, 2029, at any time until the close of business on the second scheduled trading day immediately before the maturity date.
The Company will settle conversions in cash and, if applicable, shares of its common stock, based on the applicable conversion rate(s). 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 January 15, 2028 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 the Company’s common stock exceeds
The Company intends to use a portion of the net proceeds from the offering to fund the cost of entering into the convertible note hedge transactions described below (after such cost is partially offset by the proceeds from entering into the warrant transactions described below). The Company expects to use a portion of the net proceeds from the offering to repurchase a portion of its outstanding
In connection with issuing the 2025 Notes, the Company entered into convertible note hedge transactions (the “existing convertible note hedge transactions”) and warrant transactions (the “existing warrant transactions,” and, together with the existing convertible note hedge transactions, the “existing call spread transactions”) with certain financial institutions (the “existing option counterparties”). If the Company repurchases any of its 2025 Notes, then the Company may enter into agreements with the existing option counterparties to terminate a portion of the existing convertible note hedge transactions in a notional amount corresponding to the amount of 2025 Notes repurchased. The Company may also enter into agreements with the existing option counterparties to terminate a portion of the existing warrant transactions. In connection with the termination of any of the existing call spread transactions, the Company expects the existing option counterparties or their respective affiliates to unwind their related hedge positions, which may involve the sale of shares of the Company’s common stock in the open market or other transactions with respect to the Company’s common stock. This hedge unwind activity could offset or exacerbate the effects of the purchase, sale or other activity that holders of the 2025 Notes that participate in the repurchase transactions may effect in connection with those transactions.
In connection with the pricing of the notes, the Company expects to enter into one or more privately negotiated convertible note hedge transactions with the initial purchasers or their affiliates (the “hedge counterparties”). The convertible note hedge transactions are expected to cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that will initially underlie the notes. The Company also intends to enter into one or more separate, privately negotiated warrant transactions with the hedge counterparties collectively relating to the same number of shares of the Company’s common stock, subject to customary anti-dilution adjustments, and for which the Company will receive premiums to partially offset the cost of entering into the hedge transactions. If the initial purchasers exercise their option to purchase additional notes, the Company may enter into one or more additional convertible note hedge transactions and one or more additional warrant transactions with the hedge counterparties, which, if executed, will initially cover, collectively, the number of shares of the Company’s common stock that will initially underlie the additional notes the Company sells to the initial purchasers.
The convertible note hedge transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be. However, the warrant transactions could separately have a dilutive effect with respect to the Company’s common stock to the extent that the market value per share of the Company’s common stock exceeds the strike price of the warrants evidenced by the warrant transactions.
In connection with establishing their initial hedges with respect to the convertible note hedge transactions and the warrant transactions, the hedge counterparties or their respective affiliates expect to enter into various cash-settled over-the-counter derivative transactions with respect to the Company’s common stock concurrently with, or shortly after, or purchase shares of the Company’s common stock shortly after, the pricing of the notes, and may unwind these cash-settled over-the-counter derivative transactions and purchase shares of the Company’s common stock in open market transactions shortly after the pricing of the notes. These activities could increase, or prevent a decline in, the market price of the Company’s common stock concurrently with, or shortly after, the pricing of the notes.
In addition, the hedge counterparties or their respective affiliates may modify their hedge positions with respect to the convertible note hedge transactions and the warrant transactions from time to time after the pricing of the notes, and are likely to do so during any observation period, by purchasing or selling shares of the Company’s common stock or the notes in privately negotiated transactions or open market transactions or by entering into or unwinding various over-the-counter derivative transactions with respect to the Company’s common stock. Any of these activities could, however, adversely affect the trading price of the Company’s common stock and, consequently, the value of the consideration that noteholders receive upon conversion of the notes, the trading price of the notes or noteholders’ ability to convert the notes.
The offer and sale of the notes and the shares of common stock, if any, issuable upon conversion of the notes have not been registered under the Securities Act or any state securities laws, and the notes and such shares may not be offered or sold absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state laws.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, 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 such jurisdiction. Any offers of the notes will be made only by means of a private offering memorandum. The notes being offered have not been approved or disapproved by any regulatory authority, nor has any such authority passed upon the accuracy or adequacy of the applicable private offering memorandum.
About Winnebago Industries
Winnebago Industries, Inc. is a leading North American manufacturer of outdoor lifestyle products under the Winnebago, Grand Design, Chris-Craft, Newmar and Barletta brands, which are used primarily in leisure travel and outdoor recreation activities. The Company builds high-quality motorhomes, travel trailers, fifth-wheel products, outboard and sterndrive powerboats, pontoons, and commercial community outreach vehicles. Committed to advancing sustainable innovation and leveraging vertical integration in key component areas, Winnebago Industries has multiple facilities in Iowa, Indiana, Minnesota and Florida. The Company’s common stock is listed on the New York Stock Exchange and traded under the symbol WGO. For access to Winnebago Industries' investor relations material or to add your name to an automatic email list for Company news releases, visit http://investor.wgo.net.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to risks relating to the offering of the notes, general economic uncertainty in key markets and a worsening of domestic and global economic conditions or low levels of economic growth; availability of financing for RV and marine dealers; competition and new product introductions by competitors; ability to innovate and commercialize new products; ability to manage the Company’s inventory to meet demand; risk related to cyclicality and seasonality of the Company’s business; risk related to independent dealers; risk related to dealer consolidation or the loss of a significant dealer; significant increase in repurchase obligations; ability to retain relationships with the Company’s suppliers and obtain components; business or production disruptions; inadequate management of dealer inventory levels; increased material and component costs, including availability and price of fuel and other raw materials; ability to integrate mergers and acquisitions; ability to attract and retain qualified personnel and changes in market compensation rates; exposure to warranty claims; ability to protect the Company’s information technology systems from data security, cyberattacks, and network disruption risks and the ability to successfully upgrade and evolve the Company’s information technology systems; ability to retain brand reputation and related exposure to product liability claims; governmental regulation, including for climate change; increased attention to environmental, social, and governance ("ESG") matters, and the Company’s ability to meet its commitments; impairment of goodwill and trade names; and risks related to the Company’s Convertible and Senior Secured Notes including the Company’s ability to satisfy its obligations under these notes. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the Company's filings with the Securities and Exchange Commission ("SEC") over the last 12 months, copies of which are available from the SEC or from the Company upon request. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release or to reflect any changes in the Company's expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.
Contacts
Investors: Ray Posadas
ir@winnebagoind.com
Media: Dan Sullivan
media@winnebagoind.com
FAQ
What is Winnebago Industries, Inc. planning to offer in a private offering?
How does Winnebago Industries, Inc. intend to use the net proceeds from the offering?
What are the potential negative impacts of the convertible senior notes offering?
