| Item 1.01 | Entry into a Material Definitive Agreement. |
Convertible Notes Offering
On May 16, 2024, MKS Instruments, Inc. (the “Company”) completed its previously announced private offering of $1.4 billion aggregate principal amount of its convertible senior notes due 2030 (the “Notes”). The Notes were sold in a private placement under a purchase agreement, dated as of May 13, 2024 (the “Purchase Agreement”), entered into by and between the Company and each of Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, BofA Securities, Inc. and Mizuho Securities USA LLC, as representatives of the several initial purchasers named therein, for resale 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”).
The aggregate principal amount of the Notes sold in the offering was $1.4 billion, which includes $200.0 million aggregate principal amount of Notes issued pursuant to an option to purchase, within a 13-day period beginning on, and including, the date on which the Notes were first issued, which the initial purchasers exercised in full on May 14, 2024 and which additional purchase was also completed on May 16, 2024.
The net proceeds from the offering were approximately $1,374.2 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by the Company. The Company used approximately $167.4 million of the net proceeds from the offering to pay the cost of the capped call transactions described below. The Company intends to use the remaining net proceeds from the offering to repay approximately $1,206.0 million in borrowings outstanding under its First Lien USD tranche B term loan, together with accrued interest, under its Term Loan Facility, as well as for general corporate purposes.
A copy of the press release announcing the closing of the offering of the Notes is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Indenture and the Notes
On May 16, 2024, the Company entered into an indenture (the “Indenture”) with respect to the Notes with U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). Under the Indenture, the Notes are senior unsecured obligations of the Company and bear interest at a rate of 1.25% per annum, with interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024. The Notes will mature on June 1, 2030, unless earlier converted, redeemed or repurchased in accordance with their terms.
Subject to certain conditions, on or after June 5, 2027, the Company may redeem for cash all or any portion of the notes at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the trading day immediately preceding the date the notice of redemption is sent.
The conversion rate for the Notes is initially 6.4799 shares of the Company’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $154.32 per share. The conversion rate will be subject to adjustment upon the occurrence of certain events.
Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Notes being converted. Prior to March 1, 2030, noteholders may convert all or any portion of their Notes only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date.
If the Company undergoes a fundamental change (as defined in the Indenture) prior to the maturity date of the Notes, holders may require the Company to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
