Power-One, a provider of power conversion and power management solutions, has announced that it has agreed to a significant, privately issued minority investment by Silver Lake Sumeru,
Power-One, a provider of power conversion and power management solutions, has announced that it has agreed to a significant, privately issued minority investment by Silver Lake Sumeru, an investment fund focused on middle-market technology enterprises.
Silver Lake Sumeru will invest USD60m of new capital consisting of USD23.6m of convertible preferred stock, USD36.4m senior convertible notes due 2019, and 8.7 million warrants for Power-One common stock.
The warrants will have an exercise price of USD1.33 and expire in seven years. The preferred stock will pay quarterly dividends at a rate of ten per cent per year, and the notes will pay interest semi-annually at a rate of six per cent per year the first year, eight per cent the second year and ten per cent thereafter.
Both the preferred stock and the notes will be convertible into Power-One common stock at a conversion price of USD1.35, which represents an approximate 42.1 per cent premium over the closing price of Power-One common Stock on 23 April 2009 of USD0.95 a share. The conversion price and exercise price for all instruments are subject to adjustment under certain circumstances.
Power-One anticipates that the net proceeds from the transaction, after deducting the estimated expenses, will be approximately USD56m. Power-One intends to use these proceeds to purchase eight per cent notes from consenting bondholders to fund strategic initiatives, and to provide for working capital needs and general corporate purposes.
The terms of the transaction limit conversion or exercise into Power-One common stock if such action would increase Silver Lake Sumeru’s voting or ownership percentage to more than 19.9 per cent. In addition, Silver Lake Sumeru may not transfer any of the instruments for a period of 12 months after closing, subject to limited exceptions. The preferred stock and notes are redeemable by either Power-One or the holders after the fifth anniversary of issuance subject to certain conditions.
The preferred stock will have voting rights on an as-converted basis. Under the preferred stock provisions, two individuals nominated by Silver Lake Sumeru will be appointed to the Power-One board of directors in conjunctions with the closing of the transaction. Additionally, Silver Lake Sumeru will have the right to nominate one independent candidate to stand for election to the Power-One board of directors beginning at the 2010 annual meeting.
Power-One has announced that pursuant to private negotiations with two of its bondholders, it has obtained majority consent and will repurchase USD21.75m of outstanding bonds from these two bondholders upon the close of the transaction, allowing Power-One to modify certain covenants in the existing eight per cent senior secured convertible notes due 2013. These amendments will lower the minimum cash requirement to the lower of USD20m or 50 per cent of outstanding eight per cent senior secured convertible notes due 2013, remove the minimum tangible net worth covenant; and loosen other restrictions that limit the total debt we may incur and our ability to secure new debt financing or execute our business strategy.
Power-One also announced that effective 23 April 2009, its existing stockholder rights plan has been amended to reduce the ownership threshold to 4.9 per cent.
The transaction is expected to close by 8 May 2009, subject to customary closing conditions.
Richard Thompson, chief executive officer, says: ‘We are pleased to announce this agreement with Silver Lake Sumeru and believe that this relationship will significantly strengthen our execution capabilities, create a more effective capital structure and position us to deliver long-term shareholder value. Silver Lake Sumeru brings a wealth of technology focus and operational expertise, and we are excited to partner with them as we take the company to the next level of performance and profitability.’
Kyle Ryland of Silver Lake Sumeru adds: ‘Silver Lake Sumeru is committed to providing technology companies transformational capital and expertise in order to pursue growth opportunities and profitability. Power-One fits well with our investment strategy and we look forward to working closely with the company.’