| Item 1.01 | Entry into a Material Definitive Agreement |
Indenture, Notes and Guarantees
On February 22, 2019, Fortive Corporation (“Fortive”) issued $1.4375 billion in aggregate principal amount of its 0.875% Convertible Senior Notes due 2022 (the “Notes”), including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The Notes were sold in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).
The Notes were issued pursuant to an indenture (the “Indenture”), dated February 22, 2019, between Fortive, The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), and the guarantors party thereto. The Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by four of Fortive’s wholly-owned domestic subsidiaries (the “Guarantees”). Under the Indenture, the Notes will be senior unsecured obligations of Fortive, and the Notes and the Guarantees will rank equally in right of payment with all of Fortive’s and the guarantors’ existing and future liabilities that are not subordinated, but will effectively rank junior to any secured indebtedness of Fortive and the guarantors to the extent of the value of the assets securing such indebtedness. In addition, the Notes are structurally subordinated to all of the existing and future obligations, including trade payables, of Fortive’s subsidiaries that do not guarantee the Notes.
The Notes will bear interest at a rate of 0.875% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. The Notes will mature on February 15, 2022, unless earlier repurchased or converted in accordance with their terms prior to such date.
The Notes are convertible into shares of Fortive’s common stock at an initial conversion rate of 9.3777 shares per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $106.64 per share), subject to adjustment upon the occurrence of certain events. The initial conversion price represents a premium of approximately 32.5% to the $80.48 per share closing price of Fortive’s common stock on February 19, 2019. Upon conversion of the Notes, holders will receive cash, shares of Fortive’s common stock, or a combination thereof, at Fortive’s election. Fortive’s current intention is to settle such conversions through cash up to the principal amount of the converted Notes and, if applicable, through shares of common stock of Fortive for conversion value, if any, in excess of the principal amount of the converted Notes.
Prior to November 15, 2021, the Notes will be convertible only upon the occurrence of certain events and will be convertible thereafter at any time until the close of business on the business day immediately preceding the maturity date of the Notes.
The conversion rate is subject to customary anti-dilution adjustments. If certain corporate events described in the Indenture occur prior to the maturity date, the conversion rate will be increased for a holder that elects to convert its Notes in connection with such corporate event in certain circumstances.
The Notes are not redeemable prior to maturity, and no sinking fund is provided for the Notes. If Fortive undergoes a “fundamental change,” as defined in the Indenture, subject to certain conditions, holders may require Fortive to repurchase for cash all or any portion of their Notes. The fundamental change purchase price will be 100% of the principal amount of the Notes to be repurchased plus any accrued and unpaid additional interest up to but excluding the fundamental change repurchase date.
