SanDisk to price $1 billion of 7-year convertibles late Tuesday, talked at 0.75%-1.25%, up 27.5%-32.5%

By Kenneth Lim

Boston, May 8 - SanDisk Corp. on Monday announced an offering of $1 billion of 7-year convertible senior notes talked at a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%.

The deal is expected to price Tuesday after the market closes.

The convertibles are offered at par, and there will be convertible note hedge and warrant transactions to increase the effective premium.

There is a greenshoe option for a further $150 million.

Morgan Stanley and Goldman Sachs & Co. are the bookrunners of the registered off-the-shelf deal.

The notes will be non-callable for life, and they will not be putable except in a change of control.

The notes may be converted into SanDisk shares if the stock price exceeds 120% of the conversion price.

There is full dividend protection, and takeover protection includes a premium make-whole feature.

There is a net-share settlement feature that lets the company settle conversions in cash up to the principal amount of $1,000 per note.

SanDisk is a Sunnyvale, Calif.-based maker of flash storage cards used in consumer electronics. The proceeds of the offering will be used for general corporate purposes including capital expenditures. The proceeds may also pay for strategic investments and acquisitions, although SanDisk said it has no specific acquisition commitments at the moment. Part of the proceeds will also be used for the note hedging transactions.

SanDisk stock closed at $64.70 on Monday, up $2.17 or 3.47%, before the deal was announced.

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