Micron higher outright on buyout rumor; SanDisk in focus; WPX Energy plans mandatory deal

By Rebecca Melvin

New York, July 14 – U.S. convertibles were a little more active on Tuesday compared to a quiet session on Monday, as equities continued to rise.

The takeover chatter in Micron Technology Inc. may have contributed to some of the better action, a New York-based trader said.

Micron was rumored to be getting a bid from China’s Tsinghua Unigroup chip maker as early as Wednesday. Micron had not yet received an offer, the company said, but speculation sent the underlying shares of the Boise, Idaho-based chipmaker up 11%.

Related to the Micron rumor, SanDisk Corp. was in focus as the Milpitas, Calif.-based flash memory chip maker is also a takeover candidate.

SanDisk’s 1.5% convertibles due 2017 traded at 126.6 with the underlying shares around $55.50.

Last week the SanDisk 1.5% convertibles traded at 129.6 with the shares a dollar higher at $56.50.

In primary action, WPX Energy Inc. launched an offering of $300 million of mandatory convertible preferred shares, together with $1.2 billion of straight notes and 27 million shares of common stock, to help fund its acquisition of RKI Exploration and Production LLC. WPX shares rose 71 cents, or 6%, to $11.83.

Energy convertibles in general were quiet, however, with neither the new mandatory deal nor crude-oil market volatility spurring trading action.

Crude oil fell initially on Tuesday on news that the U.S. and five other nations have notched a deal with Iran to curb its nuclear program in exchange for removal of sanctions against its products.

Oil prices fell and then rallied back on word that it will be at least several months before Iranian oil is on the market, adding to the supply surplus in global oil markets. West Texas Intermediate crude oil for August delivery added 1.4% to $52.95 per barrel.

Chesapeake Energy Corp.’s convertibles saw some activity. The Chesapeake 2.5% convertibles due 2037 (Cusip: 165167BZ9) traded up a point or two to 95 with the underlying shares of the Oklahoma City-based energy company jumping especially into the close and ending up 48 cents, or 4.4%, to $11.38.

Radnor, Pa.-based oil and gas company Penn Virginia Corp. shares have been volatile, rising 38 cents, or 12%, to $3.60 on Tuesday after dropping sharply on Monday. The company’s 6% convertibles were seen up at 79 from about 74 previously, according to a market source.

Overall convertibles trading volume was still light.

“People are waiting and seeing,” a Connecticut-based sellsider said.

In economic news, the Commerce Department reported that U.S. retail sales were down 0.3% in June from the prior month to a seasonally adjusted $442 billion. A 0.2% rise for the month had been expected.

The Commerce Department also revised lower the prior two months of retail sales. May sales are now showing a 1% rise, down from an initially reported 1.2% gain, and sales in April were flat, a downward revision from a previously reported 0.2% increase.

Equities gained. The Nasdaq composite index rose 33.38 points, or 0.7%, to 5,104.89, the Dow Jones industrial average ended up 75.90 points, or 0.4%, to 18.053.58 and the S&P 500 stock market added 9.35 points, or 0.6%, to 2,108.95.

Micron adds on rumor

Micron’s 3% convertibles due 2043 were up about 4 points to 92 to 93 from 88 to 89 on an outright basis, according to Trace data. Shares were up to about $19.50, which was shy of the $21.00-per-share bid price that many expected.

Among Micron’s other convertible bond issues, the Micron 2.375% convertibles due 2032, or the C series, were seen up to 208.7 from 188.8, according to a market source.

The Micron 2.125% convertibles due 2033, or the F series, were at 188.4 from 170.6.

The Micron 1.625% convertibles due 2033, or the E series, were seen 186.7 from 170.

And the Micron 3.125% convertibles due 2032, or the D series, were at 209.7 from 190.3.

Micron shares plunged June 25 after the company reported disappointing third-quarter results that pointed to a continuing weak PC demand.

The Micron 3% bonds had been at 105 versus an underlying share price of $25.19 in early June and were 94.75 versus an underlying share price of $20.50 in late June.

On Tuesday, Micron shares ended up $2.00, or 11%, at $19.61 in heavy volume.

WPX Energy to price

WPX Energy’s planned $50.00 par mandatory was talked at a 6% to 6.5% dividend and a 17.5% to 22.5% initial conversion premium, according to a market source.

Barclays is the bookrunning manager of the mandatory deal, which has a $45 million greenshoe.

The company is also pricing $1.2 billion of straight notes and 27 million shares of common stock. All of the deals are being made by means of separate prospectus supplements under WPX’s effective shelf registration statement.

Pricing is expected to occur late Thursday.

Proceeds from the offerings, cash on hand and borrowings under its revolving credit facility will be used to fund the company’s acquisition of RKI Exploration and Production.

If the acquisition is not completed, WPX will used proceeds from the stock and mandatory deals for working capital and general corporate purposes, including the repayment of debt and other acquisitions.

Tulsa, Okla.-based WPX is a natural gas and oil exploration and production company.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Micron Technology Inc. NYSE: MU

Penn Virginia Corp. NYSE: PVA

SanDisk Corp. Nasdaq: SNDK

WPX Energy Inc. NYSE: WPX

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.