Akamai Technologies reported late Monday that it intends to offer $2.6 billion in convertible senior notes, a move that coincided with the company's stock declining about 3% in after-hours trading.
The proposed financing is structured as two equal tranches: $1.3 billion of 0% convertible senior notes due May 15, 2030, and $1.3 billion of 0% convertible senior notes due May 15, 2032. The notes will be sold to qualified institutional buyers under Rule 144A, and Akamai has agreed to give the initial purchasers an option to buy an additional $200 million of each series.
Company officials stated that net proceeds from the offering will be directed primarily to meet accelerated capital expenditure requirements for Akamai's Cloud Infrastructure Services business, with a focus on expanding the company's global footprint. A portion of the proceeds will also serve general corporate purposes. The company said it expects to use approximately $350 million of the proceeds to repurchase shares from note purchasers in privately-negotiated transactions.
The 2030 Notes will mature on May 15, 2030, and the 2032 Notes will mature on May 15, 2032. Upon conversion of the notes, Akamai will pay cash up to the aggregate principal amount of the notes and may settle any remaining amounts by paying or delivering cash, shares of common stock, or a combination of both.
Akamai indicated plans to enter into convertible note hedge transactions and warrant transactions with the initial purchasers and other financial institutions. The stated purpose of the hedge transactions is to diminish potential dilution of common stock that could occur if the notes are converted. The company noted, however, that the related warrant transactions could be dilutive if the market price per share rises above the warrants' strike price.
The offering notes will be senior unsecured obligations of Akamai and will not carry regular interest. The notes have not been registered under the Securities Act of 1933 and will be offered only through a private offering memorandum.
Market reaction was immediate: Akamai's shares fell about 3% in after-hours trading on the announcement. The company did not provide additional forward-looking commentary in the filing excerpted in the release.
This financing plan, as described by the company, combines funding for infrastructure expansion with a prearranged mechanism to repurchase a portion of shares from the new note purchasers, while also employing hedging and warrant strategies intended to manage the impact on outstanding common stock.