Item 1.01 Entry into a Material Definitive Agreement.
Indenture and Notes
On December 8, 2023, Merit Medical Systems, Inc. (“Merit”) closed an offering of $747.5 million aggregate principal amount of its 3.00% Convertible Senior Notes due 2029 (the “Notes”). The Notes offering was comprised of (i) a base offering of $650.0 million in aggregate principal amount of Notes and (ii) an additional $97.5 million in aggregate principal amount of Notes purchased by the initial purchasers in the offering pursuant to full exercise of their option to purchase additional Notes. The Notes were issued pursuant to an indenture (the “Indenture”) dated as of December 8, 2023, by and between Merit and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
After deducting the initial purchasers’ discounts and commissions but before estimated offering expenses payable by Merit, the net proceeds to Merit from the offering of the Notes are estimated to be approximately $725.1 million. After payment of the cost of entering into the capped call transactions described below, Merit intends to use the remainder of the net proceeds from the Notes offering for general corporate purposes, which may include repayment or reduction of existing debt, sales and marketing activities, medical affairs and educational efforts, research and development, clinical studies, working capital, capital expenditures and investments in and acquisitions of other companies, products or technologies in the future. However, while Merit regularly evaluates acquisition opportunities, Merit has no commitments with respect to any acquisitions of other companies, products or technologies of a material nature at this time.
The Notes will be Merit’s senior unsecured obligations and will rank senior in right of payment to any of Merit’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of Merit’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of Merit’s senior, secured indebtedness (including indebtedness under Merit’s Fourth Amended and Restated Credit Agreement) to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of Merit’s subsidiaries.
The Notes will bear interest at 3.00% per year, payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2024. The Notes will mature on February 1, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date.
Holders may surrender their Notes, in integral multiples of $1,000 principal amount, for conversion into cash and, if applicable, shares of Merit’s common stock, prior to the close of business on the second scheduled trading day immediately preceding the maturity date based on the applicable conversion rate and only under certain circumstances specified within the Indenture. Upon surrender of Notes for conversion, Merit 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 Merit’s common stock or a combination of cash and shares of Merit’s common stock, at Merit’s election, in respect of the remainder, if any, of Merit’s conversion obligation in excess of the aggregate principal amount of the Notes being converted. The initial conversion rate for the Notes is 11.5171 shares of Merit’s common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $86.83 per share of Merit’s common stock), subject to adjustment as provided in the Indenture.
The Notes will be redeemable for cash in whole or in part (subject to the “Partial Redemption Limitation” (as defined in the Indenture)), at Merit’s option, on a redemption date occurring on or after February 8, 2027 and before the 61st scheduled trading day immediately preceding the maturity date, but only if the closing price per share of Merit’s common stock equals or exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, including the trading day immediately before the date Merit sends the related redemption notice, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date Merit sends such notice.
If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require Merit to repurchase all or a portion of their Notes at a cash repurchase price equal to 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, to, but excluding, the Fundamental Change repurchase date.
