SanDisk to Offer $1 Billion Of Convertible Senior Notes

SanDisk Corporation announced its intention to commence an underwritten public offering, subject to market and other conditions, of $1.0 billion principal amount of Convertible Senior Notes due in 2017 pursuant to an effective registration statement previously filed with the Securities and Exchange Commission. In addition, the Company expects to grant the underwriters an option to purchase up to an additional $150 million principal amount of notes from the Company to cover overallotments.

The Company currently intends to use the net proceeds of the offering for general corporate purposes, including:

• the repayment at maturity or repurchase, from time to time, of a portion of its outstanding $1.15 billion aggregate principal amount of senior convertible notes originally issued in 2006, which bear interest at a rate of 1% per annum and mature on May 15, 2013;
• capital expenditures for new and existing manufacturing facilities;
• development of new technologies;
• general working capital; and
• other non-manufacturing capital expenditures.

The net proceeds may also be used to fund strategic investments or acquisitions of products, technologies or complementary businesses or to obtain the right or license to use additional technologies. The Company currently has no such commitments or agreements for any specific acquisitions, investments or licenses.

In addition, the Company intends to use a portion of the net proceeds of the offering to fund the cost to it of the privately negotiated convertible note hedge transactions (after taking into account the proceeds to it from warrant transactions) that the Company intends to enter into with one or more dealers, each of whom may be an affiliate of an underwriter in the offering.

The Company also intends to enter into separate warrant transactions with such dealers or their affiliates, and anticipates that the warrants will have an exercise price that is up to approximately 75% higher than the closing price of the Company’s common stock on the date the warrants are issued.

These convertible note hedge transactions and warrant transactions are expected to reduce the potential dilution with respect to the Company’s common stock upon conversion of the notes; however, the warrant transactions will have a dilutive effect with respect to the Company’s common stock to the extent that the market price per share of the Company’s common stock exceeds the strike price of the warrants.

In connection with hedging these transactions, such dealers or their affiliates expect to enter into various derivatives transactions and engage in other activities that could have the effect of increasing or preventing a decline in the price of the Company’s common stock in connection with the pricing of the note offering. These activities may be discontinued at any time. In addition, in connection with any conversion of the notes, the dealers or their respective affiliates may enter into derivative transactions and engage in other activities that could adversely impact the price of the Company’s common stock and of the notes.

Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. are the joint book running managers for the offering.