SanDisk to Offer $1 Billion of Convertible Senior Notes

SanDisk Corporation announced its intention to offer, subject to market and other conditions, up to $1.0 billion principal amount of Convertible Senior Notes due in 2020 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.

In addition, the company expects to grant the initial purchaser for the offering an option to purchase up to an additional $150 million principal amount of notes from the company to cover over-allotments.

The company intends to use a portion of the net proceeds of the offering to fund the cost of privately negotiated convertible note hedge transactions, which will serve to increase the effective conversion price of the convertible debt. In addition, the company intends to use a portion of the net proceeds to repurchase shares of its common stock from purchasers of the notes in privately negotiated transactions, which will be consummated concurrently with the offering.

The remaining net proceeds are expected to be used for:

• the repayment at maturity, or repurchase from time to time, of a portion or all of the company’s currently outstanding indebtedness;
• potential strategic investments or acquisitions;
• the repurchase, from time to time, of shares of the company’s common stock pursuant to the company’s existing stock repurchase programs; and
• other general corporate purposes, including capital expenditures related to manufacturing and technology.

Privately Negotiated Convertible Note Hedge Transactions
The company currently intends to use a portion of the net proceeds of the offering to fund the cost of 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 the initial purchaser for the offering or other financial institutions (the “dealers”). The company also intends to enter into separate privately negotiated warrant transactions with such dealers or their affiliates, and anticipates that the warrants will have an exercise price that is up to approximately 80% 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 could 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 these hedging 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 notes 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.

Repurchase of Common Stock From Purchasers of Notes
The company currently intends to use a portion of the net proceeds of the offering to repurchase shares of its common stock from purchasers of notes in privately negotiated transactions effected through the initial purchaser as the company’s agent. The price of the common stock repurchased in such transactions is expected to equal the closing price per share of the company’s common stock on the date of the pricing of the offering. Repurchases of shares of the company’s common stock could increase, or prevent a decrease in, the market price of the company’s common stock or the notes. In the case of repurchases effected concurrently with this offering, this activity could affect the market price of the company’s common stock concurrently with, or shortly after, the pricing of the notes, and could result in a higher effective conversion price for the notes.

Goldman, Sachs & Co. will act as the sole initial purchaser for resale of the offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.