j2 Global deal edges fair value at midpoint of talk; Halozyme, CyberArk Software on tap

By Rebecca Melvin

New York, Nov. 12 – j2 Global Inc. was on the radar of convertible players early Tuesday as shares of the Los Angeles-based internet services provider slipped 5% after it announced an offering of $500 million of seven-year convertible senior notes after the market close on Monday.

The j2 Global deal, which was expected to price after the market close on Tuesday, was seen worth about 100.25 at the midpoint of price talk, using a credit spread of 257 basis points over Libor and 24% vol., a New York-based portfolio manager said.

The Rule 144A notes were being talked to yield 1.5% to 2% with an initial conversion premium of 30% to 35%.

j2’s existing 3.25% convertible due 2029 traded lower in tandem with the underlying shares at 149.15 and 148.43 early Tuesday, which was down from 154 to 154.25 on Monday, according to Trace data. The common shares fell $5.40, or 5.1%. By the close, the stock was down $6.10, or 6%, to $94.50.

“Outrights will like it, so it will trade OK,” the manager said.

The mediocre valuation was seen in a positive light, since new deals often perform better than the valuation would suggest, the manager said. “Look at SWK: it was only worth 99, and it did better than that.”

The Stanley Black & Decker Inc. convertible deal priced last week.

Other names in trade on Tuesday included Silicon Laboratories Inc., Zillow Group Inc. and Twitter Inc.

Elsewhere, NXP Semiconductors NV’s 1% convertibles, which mature on Dec. 1, 2019, added 0.5 point or so to trade at 113.4 early Tuesday, with shares of the chipmaker trading up by $1.98, or 1.7%, to $120.26.

The market overall was deemed unchanged to slightly lower, a market source said.

After the market close, Halozyme Therapeutics Inc. announced that it plans to price $400 million of five-year convertibles notes, and CyberArk Software Ltd. announced that it plans to sell $500 million of five-year convertibles.

The Halozyme deal was seen worth about 100.90 at the midpoint of talk, using a credit spread of 350 bps over Libor and 35% vol., a New York-based trader said. The Halo deal was being talked to yield 1% to 1.5% with an initial conversion premium of 35% to 40%.

The CyberArk deal was seen worth 101.87 at the midpoint of price talk, using a credit spread of 250 bps over Libor and 40% vol., the New York-based trader said. The CyberArk deal was being talked at a 0% coupon and a 32.5% to 37.5% initial conversion premium.

Meanwhile, Singapore-based digital entertainment, e-commerce, and digital financial services company Sea Ltd. announced that it plans to price $1 billion of five-year convertible notes under Rule 144A and Regulation S, according to a company news release on Tuesday.

The transaction has a greenshoe of $150 million.

The notes are non-callable until Dec. 1, 2022 and then are provisionally callable if shares exceed 130% of the conversion price.

There is takeover protection.

In connection with the pricing of the notes, Sea expects to enter into capped call transactions with the initial purchasers or their counterparties.

Proceeds will be used to pay the cost of the capped call transactions, and for business expansion and other general corporate purposes, including potential strategic investments and acquisitions.

Halozyme on tap

Meanwhile, Halozyme’s $400 million Rule 144A deal has a $60 million greenshoe and was being sold via joint bookrunners BofA Securities and Evercore, with Cantor Fitzgerald as co-manager.

The deal was expected to price after the market close on Wednesday.

The notes are non-callable for three years and then provisionally callable at a price trigger of 130%. There are no puts. They have contingent conversion at a trigger of 130%.

The net-share settled notes have takeover protection via a make-whole adjustment premium delivered upon conversion as incremental shares; and there is full dividend protection via conversion ratio adjustment.

Up to $200 million of the net proceeds from the offering are expected to be used to repurchase shares of the company’s common stock concurrently with, or shortly after, the pricing of the notes. Remaining proceeds are earmarked for general corporate purposes, including share repurchases subsequent to the offering, working capital and retirement of existing debt under the company’s loan agreement with Oxford Finance and Silicon Valley Bank.

San Diego-based Halozyme is a biotechnology company developing products for diabetes, cancer, dermatology and drug delivery markets.

CyberArk to price

CyberArk announced that it plans to price a $500 million offering of five-year convertibles notes, which were being talked at a 0% coupon and 32.5% to 37.5% initial conversion premium, according to market sources.

Morgan Stanley is left lead bookrunner of the Rule 144A deal, which has a $75 million greenshoe.

The notes are non-callable for three years and then provisionally callable if shares exceed 130% of the conversion price. There are no puts.

In connection with the pricing of the notes, CyberArk expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers of the notes.

The proceeds of the notes will be used for working capital and other general corporate purposes, and to pay the cost of the capped call transactions.

CyberArk is a computer and information security company, based in Petah Tikva, Israel, with U.S. headquarters in Newton, Mass. It said the deal will price subject to market conditions.

Mentioned in this article:

CyberArk Software Ltd. Nasdaq: CYBR

Halozyme Therapeutics Inc. Nasdaq: HALO

j2 Global Inc. Nasdaq: JCOM

NXP Semiconductors NV: Nasdaq: NXPI

Silicon Laboratories Inc. Nasdaq: SLAB

Twitter Inc. Nasdaq: TWTR

Zillow Group Inc. Nasdaq: Z

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