Item 1.01 Entry into a Material Definitive Agreement.
Purchase Agreement
On September 7, 2023, Seagate Technology Holdings plc (the “Company”) and Seagate HDD Cayman (“HDD”), an indirect wholly owned subsidiary of the Company, entered into a purchase agreement (the “Purchase Agreement”), by and among the Company, HDD, Seagate Technology Unlimited Company (“STUC” and, together with the Company, the “Guarantors”) and Morgan Stanley & Co. LLC, as representative of the initial purchasers named therein (the “Initial Purchasers”), pursuant to which HDD has agreed to issue and sell, and the Initial Purchasers have agreed to purchase, $1.3 billion aggregate principal amount of 3.50% Exchangeable Senior Notes due 2028 (the “Notes”) in a private placement to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). In addition, HDD granted the Initial Purchasers of the Notes an option to purchase up to an additional $200 million aggregate principal amount of Notes for settlement within a 13-day period beginning on, and including, the date on which the Notes are first issued, solely to cover over-allotments.
The Notes will be exchangeable at the option of the holders only under certain circumstances and solely into cash up to the aggregate principal amount of Notes to be exchanged, and cash, ordinary shares of the Company, or a combination of both, at HDD’s election, in respect of any remainder of the exchange obligation in excess of such principal amount. The initial exchange rate for the Notes is 12.1253 ordinary shares per $1,000 principal amount of Notes (equivalent to an initial exchange price of approximately $82.47 per share, which represents an exchange premium of approximately 30% to the last reported sale price of the ordinary shares of the Company on the Nasdaq Global Select Market on September 7, 2023). The offering of the Notes is expected to close on September 13, 2023, subject to satisfaction of customary closing conditions.
The Notes will be senior unsecured debt obligations of HDD and will initially be guaranteed on a senior unsecured basis by the Guarantors. HDD intends to use approximately $1.10 billion (or approximately $1.30 billion if the initial purchasers exercise their over-allotment option in full) of the net proceeds from this offering to repay existing indebtedness, including portions of its outstanding term loans and/or senior notes. The remaining net proceeds will be used for general corporate purposes, which may include repayment of other outstanding indebtedness, capital expenditures and other investments in the business.
The Purchase Agreement contains customary representations and warranties of the parties and indemnification and contribution provisions whereby the Guarantors and HDD, on the one hand, and the Initial Purchasers, on the other, have agreed to indemnify each other against certain liabilities.
Certain of the Initial Purchasers or their affiliates are lenders and/or agents under HDD’s existing credit agreement.
The foregoing description of the Purchase Agreement is only a summary and is qualified in its entirety by reference to the full text of the Purchase Agreement which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Capped Call Transactions
In connection with the pricing of the Notes, the Company and HDD entered into privately negotiated capped call transactions with one or more of the initial purchasers in the Notes offering or their respective affiliates and/or other financial institutions (the “option counterparties”) having an expiration date that is the same as the maturity date of the Notes. The capped call transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of the Company’s ordinary shares initially underlying the Notes and are expected generally to reduce the potential dilution to the Company’s ordinary shares and/or offset any cash payments that HDD is required to make upon exchange of the Notes in excess of the principal amount thereof in the event that the market value per ordinary share, as measured under the capped call transactions, is greater than the strike price of the capped call transactions, with such reduction or offset being subject to a cap. The cap price of the capped call transactions will initially be $107.8480 per share, which represents a premium of approximately 70% over the last reported sale price of the ordinary shares of $63.44 per share on The Nasdaq Global Market on September 7, 2023. If the initial purchasers of the Notes exercise their over-allotment option, HDD and the Company expect to enter into additional capped call transactions with the option counterparties.
