Sempra greenshoe lifts 6% convertible preferreds to $1.73 billion

By Marisa Wong

Morgantown, W.Va., Jan. 9 – The underwriters of Sempra Energy’s offering of series A mandatory convertible preferred stock exercised their $225 million over-allotment option in full on Jan. 5, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

Sempra priced $1.5 billion of the convertible preferreds on Jan. 4 at par with a 6% dividend and an initial conversion premium of 22.5%.

The deal came at the rich end of talk for a dividend of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, as previously reported.

The threshold appreciation price is $131.075.

The preferreds will convert into a variable number of shares on the mandatory conversion date of Jan. 15, 2021. The conversion rate will be no less than 0.7629 and no more than 0.9345, according to the deal’s prospectus.

The conversion rate will be determined based on the average volume-weighted average price of Sempra’s common stock over the 20-trading-day period commencing on and including the 21st scheduled trading day prior to Jan. 15, 2021, the company said in a news release.

A simultaneous offering of 23,364,486 shares of common stock was priced at $107.00 per share. The stock offering has a greenshoe for 3,504,672 shares.

Morgan Stanley, RBC Capital Markets and Barclays are joint bookrunners for both registered offerings, which are expected to close on Tuesday.

Proceeds from the offerings will be used to help finance the pending acquisition of Energy Future Holdings Corp., which will include Energy Future Holdings Corp.’s indirect 80% ownership of Oncor Electric Delivery Co. LLC.

If the acquisition is not completed by Dec. 1, 2018, Sempra may choose to redeem the mandatory convertible preferred stock. The mandatory convertible preferred stock may be redeemed in cash, or cash and shares if Sempra stock exceeds the initial price for 10 consecutive trading days before the notice of redemption, according to the preliminary prospectus.

Sempra is a San Diego-based electricity and natural gas utility and infrastructure company.

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