Broadcom to price $3 billion of mandatories overnight; Lannett on tap; Pinduoduo eyed

By Rebecca Melvin

New York, Sept. 24 – Broadcom Inc. announced after the market close on Tuesday that it is pricing $3 billion of series A mandatory convertible preferred stock. Generic drug maker Lannett Co. Inc. also announced plans for a much smaller $75 million offering of seven-year convertible senior notes.

The Broadcom deal was being priced on an overnight basis and talked to yield 7.625% to 8.125%. The threshold appreciation price was fixed at $330.00.

Meanwhile, an offering by Pinduoduo Inc. was in focus in U.S. convertibles early Tuesday. The China-based e-commerce platform was expected to price $875 million of five-year convertible notes after the market close, and the deal was looking cheap.

Using a credit spread of 350 basis points over Libor and 40% vol., the Rule 144A and Regulation S Pinduoduo deal looked to be worth 103.81 at the midpoint of price talk, according to a New York-based market source.

The deal was being talked at a coupon range of 0% to 0.25% and an initial conversion premium of 32.5% to 37.5%. Final terms were expected to be set after the market close on Tuesday.

A second source’s valuation was very close to that one, and the source noted that the Pinduoduo American Depositary Shares were the most actively traded health care name on Monday after Exact Sciences Corp.

On Monday, Exact Sciences’ 0.375% convertible notes due 2027 moved up almost 2 points outright in active trade on Monday to 119.4, according to Trace data.

Pinduoduo’s American Depositary Shares on the Nasdaq stock exchange were down $1.15, or 3.4%, at $32.67 in morning trade.

Broadcom on tap

The Securities and Exchange Commission-registered Broadcom deal was being priced on an overnight basis.

The deal was talked to yield 7.625% to 8.125%. The threshold appreciation price was fixed at $330.00, equating to a 17% initial conversion premium compared to the closing price of the common shares on Tuesday at $282.31.

BofA Securities Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are joint bookrunning managers of the offering, with Barclays, BMO Capital Markets, BNP Paribas Securities Corp., HSBC Securities (USA) Inc., RBC Capital Markets LLC and Wells Fargo Securities LLC also serving as bookrunners.

The preferreds are non-callable with no puts and mandatorily convert into common stock on Sept. 30, 2022.

Broadcom is a San Jose, Calif.-based maker of semiconductor and infrastructure software products.

There is an option to purchase up to an additional $450 million of mandatory shares to cover over-allotments. The notes have takeover protection via a standard make-whole table and dividend protection via standard antidilution adjustments with a $2.65 threshold.

Broadcom plans to use the net proceeds from the offering to repay a portion of the outstanding borrowings under Broadcom’s existing term loan facilities.

Lannett offering notes

Lannett, a generic drug maker based in Philadelphia, said it plans to price $75 million of seven-year convertible senior notes, according to a company news release after the market close on Tuesday.

The Rule 144A deal includes a greenshoe for $11.25 million.

In connection with the pricing of the notes, the company expects to enter into a capped call transaction with an affiliate of the initial purchaser of the notes.

The proceeds of the offering will be used to reduce outstanding borrowings under the company’s existing term loan A under its existing senior credit facility and to pay the cost of the capped call transaction.

Further details on this deal was not immediately available.

Mentioned in this article:

Broadcom Inc. Nasdaq: AVGO

Exact Sciences Inc. Nasdaq: EXAS

Lannett Co. Inc. NYSE: LCI

Pinduoduo Inc. NYSE: ADS: PDD

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