Sep 15 2010
Volcano Corporation (Nasdaq: VOLC) today announced the pricing of its offering of $100 million aggregate principal amount of 2.875 percent convertible senior notes due September 1, 2015 registered under the Securities Act of 1933, as amended. Prior to June 1, 2015, the notes will be convertible only upon certain circumstances. Upon conversion, holders will receive up to the principal amount of the notes in cash and any excess conversion value in shares of Volcano's common stock. Volcano granted the underwriter of the offering a 13-day option to purchase up to $15 million aggregate principal amount of additional notes. The offering is expected to close on September 20, 2010, subject to customary closing conditions.
The notes will mature on September 1, 2015, unless previously converted in accordance with their terms prior to such date. The notes will be general senior unsecured obligations of Volcano, and interest will be payable semi-annually in cash at a rate of 2.875 percent per annum on March 1 and September 1 of each year, beginning March 1, 2011. The initial conversion rate of 33.7339 shares of common stock per $1,000 principal amount of notes is equivalent to a conversion price of approximately $29.64 per share of common stock, which is 27.5% higher than the closing price of the Company's stock on September 14, 2010. The conversion rate is subject to adjustment in certain events, such as distributions of dividends and stock splits.
The company estimates that net proceeds from the offering will be approximately $96.1 million, after deducting the underwriter's discounts and estimated transaction expenses associated with the offering and the convertible note hedge transaction and the warrant transaction payable by the company. The company expects to use approximately $8.7 million of the net proceeds from the sale of the notes to pay the cost of the convertible note hedge transaction (after such cost is partially offset by the proceeds that the company expects to receive from the warrant transaction). The balance of the net proceeds will be used for working capital and for general corporate purposes. The company may also use a portion of the net proceeds to expand its manufacturing capabilities and/or invest in complementary products, technologies or businesses.
In order to reduce the potential dilution of the company's common stock upon future conversion of the notes, the company has entered into a convertible note hedge transaction with an affiliate of the underwriter (the "option counterparty"). The company has also entered into a warrant transaction with the option counterparty, which could have a dilutive effect on the company's common stock to the extent that the market value per share of the company's common stock, as measured under the warrant transaction, exceeds the strike price of the warrant transaction. The warrants have an exercise price of $34.88, which is 50% higher than the closing price of the company's stock on September 14, 2010. If the underwriter exercises its overallotment option to purchase additional notes, the company expects to enter into an additional convertible note hedge transaction and an additional warrant transaction.
In connection with establishing its initial hedge position with respect to the convertible note hedge transaction and the warrant transaction, the option counterparty, and/or its affiliates, expects to enter into various over-the-counter derivative transactions with respect to the company's common stock concurrently with and/or shortly after the pricing of the notes. These activities could have the effect of increasing, or limiting a decline in, the market price of the company's common stock concurrently with and/or shortly after the pricing of the notes.
In addition, the option counterparty and/or its affiliates may modify its hedge position from time to time prior to conversion or maturity of the notes by entering into and unwinding various over-the-counter derivative transactions and/or purchasing and selling shares of the company's common stock and the company's other securities, including the notes and/or other instruments it may wish to use in connection with such hedging activities (and is likely to do so during any observation period related to a conversion of notes).
J.P. Morgan Securities LLC is the sole manager of the note offering. The notes are being offered and sold under Volcano's shelf registration statement filed with the Securities and Exchange Commission on September 13, 2010, which was effective upon filing. Before you invest, you should read the prospectus and prospectus supplement to that registration statement and other documents Volcano has filed with the SEC for more complete information about Volcano and this offering. You may get these documents at the SEC web site at www.sec.gov. Printed copies of the preliminary prospectus supplement relating to this offering may also be obtained by requesting copies from J.P. Morgan Securities LLC, Attention: Broadridge Financial Solutions at 1155 Long Island Avenue, Edgewood, New York 11717, or by telephone at 866-803-9204.
This press release does not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sales of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any jurisdiction.