Gilead greenshoe fully exercised, lifting convertibles to $2.5 billion

By Devika Patel

Knoxville, Tenn., Aug. 11 - Underwriters for Gilead Sciences, Inc.'s offering of four-year 1% convertible senior notes and six-year 1.625% convertible senior notes exercised their over-allotment option in full for $150 million more of each series of convertibles, increasing the total size of the issue to $2.5 billion, the company said in an 8-K filed Wednesday with the Securities and Exchange Commission.

The offering settled for $1.25 billion of four-year notes and $1.25 billion of six-year notes.

As previously reported, the company sold the convertibles at par on July 26 in a Rule 144A offering, via bookrunners J.P. Morgan Securities Inc. and Goldman Sachs & Co.

The 1% convertibles have a conversion premium of 35% and an initial conversion price of $48.08, which equals a conversion ratio of 22.1845.

The 1.625% convertibles have a conversion premium of 36% and an initial conversion price of $45.41, which equals a conversion ratio of 22.0214.

The notes are non-callable with no puts, and there is net share settlement at the issuer's option.

Gilead will use at least $1 billion of the proceeds to repurchase common shares in private, off-market transactions.

Proceeds from the offering, together with any proceeds from concurrent warrant transactions, will also be used to fund convertible note hedge transactions. Remaining proceeds will be added to Gilead's working capital and will be used for general corporate purposes, including additional repurchases of its common stock and repayment of some of Gilead's existing debt.

Gilead entered into warrant and convertible note hedge transactions with option counterparties.

The warrants associated with the 2014 notes have an exercise price of $56.763, which is 70% higher than the closing price of Gilead's stock on July 26. And the warrants associated with the 2016 notes have an exercise price of $60.102, which is 80% percent higher than the closing price of Gilead's stock on July 26.

Foster City, Calif.-based Gilead is a biopharmaceutical company.

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