Shutterfly to price $220 million five-year convertibles to yield 0.25%-0.75%, up 27.5%-32.5%

By Rebecca Melvin

New York, May 13 - Shutterfly Inc. plans to price $220 million of five-year convertible senior notes after the market close Tuesday that were talked to yield 0.25% to 0.75% with an initial conversion premium of 27.5% to 32.5%, according to a syndicate source.

The Rule 144A deal has an over-allotment option for $30 million of notes.

Joint bookrunners are Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, BofA Merrill Lynch and Citigroup Global Markets Inc.

Co-managers are Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC and Evercore Partners LLC.

The notes are non-callable with no puts. There is takeover protection.

Proceeds are intended to be used to fund acquisitions and other strategic transactions. The company also intends to use a portion of the proceeds to pay the cost of convertible note hedge and warrant transactions and to repurchase up to $30 million of shares of common stock. Any remaining proceeds will be used for general corporate purposes.

In connection with the pricing of the notes, the company expects to enter into convertible note hedge and warrant transactions with one or more financial institutions, which may include initial purchasers of the notes.

Shutterfly is a Redwood City, Calif.-based provider of digital personalized photo products and services.

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