Zillow Group, Inc. (NASDAQ:Z) (NASDAQ:ZG) announced today the
pricing of its offering of $400.0 million aggregate principal
amount of 2.00% Convertible Senior Notes due 2021 (the “Convertible
Notes”) in a private placement under the Securities Act of 1933, as
amended (the “Securities Act”). Zillow Group also granted the
initial purchaser a 30-day option to purchase up to an additional
$60.0 million principal amount of Convertible Notes, solely to
cover over-allotments. The sale of the Convertible Notes is
expected to close on December 12, 2016, subject to customary
closing conditions.
Zillow Group expects that the net proceeds from this offering
will be approximately $389.4 million (or $447.9 million if the
initial purchaser exercises its option to purchase additional
Convertible Notes in full), after deducting discounts to the
initial purchaser and estimated offering expenses payable by Zillow
Group. Zillow Group intends to use approximately $31.8 million of
the net proceeds from the offering to pay the cost of the capped
call transactions described below. Zillow Group intends to use the
remainder of the net proceeds from the offering to repurchase a
portion of the outstanding 2.75% Convertible Senior Notes due 2020
of its wholly owned subsidiary, Trulia, LLC (the “Trulia
Convertible Notes”), in open market or privately negotiated
transactions or otherwise. If the initial purchaser exercises its
over-allotment option, Zillow Group expects to use a portion of the
proceeds from the sale of the additional notes to enter into
additional capped call transactions and for general corporate
purposes, which may include the repurchase of additional Trulia
Convertible Notes, general and administrative matters, capital
expenditures, and acquisitions or investments in technologies or
businesses that complement its business.
The Convertible Notes will be general unsecured senior
obligations of Zillow Group and will mature on December 1, 2021,
unless earlier repurchased, redeemed or converted in accordance
with their terms. The Convertible Notes will bear interest at a
fixed rate of 2.00% per year, payable semi-annually in arrears
on June 1 and December 1 of each year, beginning on
June 1, 2017.
Prior to the close of business on the business day immediately
preceding September 1, 2021, the Convertible Notes are
convertible at the option of the holders only under certain
conditions. On or after September 1, 2021, until the close of
business on the second scheduled trading day immediately preceding
the maturity date, holders may convert their Convertible Notes at
their option at the conversion rate then in effect, irrespective of
these conditions. Zillow Group will settle conversions of the
Convertible Notes by paying or delivering, as the case may be,
cash, shares of its Class C capital stock, or a combination of cash
and shares of its Class C capital stock, at its election.
The conversion rate will initially be 19.0985 shares of Class C
capital stock per $1,000 principal amount of Convertible Notes
(equivalent to an initial conversion price of approximately $52.36
per share of Class C capital stock). The conversion rate and the
corresponding conversion price will be subject to adjustment in
some events but will not be adjusted for any accrued and unpaid
interest. Zillow Group may redeem for cash all or part of the
Convertible Notes, at its option, on or after December 6, 2019,
under certain circumstances at a redemption price equal to 100% of
the principal amount of the Convertible Notes to be redeemed, plus
accrued and unpaid interest to, but excluding, the redemption date
(as defined in the indenture governing the Convertible Notes).
If Zillow Group undergoes a fundamental change (as defined in
the indenture governing the Convertible Notes), holders may require
Zillow Group to repurchase for cash all or part of their
Convertible Notes at a repurchase price equal to 100% of the
principal amount of the Convertible Notes to be purchased, plus
accrued and unpaid interest to, but excluding, the fundamental
change repurchase date (as defined in the indenture governing the
Convertible Notes). In addition, if certain fundamental changes
occur, Zillow Group may be required in certain circumstances to
increase the conversion rate for any Convertible Notes converted in
connection with such fundamental changes by a specified number of
shares of its Class C capital stock.
In connection with the pricing of the Convertible Notes, Zillow
Group has entered into privately negotiated capped call
transactions with Citigroup Global Markets Inc. and certain other
financial institutions (the “Option Counterparties”). The capped
call transactions are expected generally to reduce the potential
dilution to Zillow Group’s Class C capital stock upon any
conversion of Convertible Notes and/or offset the cash payments
Zillow Group is required to make in excess of the principal amount
of the Convertible Notes in the event that the market price of
Zillow Group’s Class C capital stock is greater than the strike
price of the capped call transactions (which initially corresponds
to the initial conversion price of the Convertible Notes and is
subject to certain adjustments under the terms of the capped call
transactions), with such reduction and/or offset subject to a cap
based on the cap price of the capped call transactions. The capped
call transactions will cover, subject to anti-dilution adjustments
substantially similar to those applicable to the Convertible Notes,
the number of shares of Zillow Group’s Class C capital stock that
will underlie the Convertible Notes. In addition, the capped call
transactions provide for Zillow Group to elect, subject to certain
conditions, for the capped call transactions to remain outstanding
(with certain modifications) following its election to redeem the
Convertible Notes, notwithstanding any conversions of Convertible
Notes in connection with such redemption.
Zillow Group expects that, in connection with establishing their
initial hedges of the capped call transactions, the Option
Counterparties and/or their respective affiliates will enter into
various derivative transactions with respect to Zillow Group’s
Class C capital stock and/or purchase shares of Zillow Group’s
Class C capital stock concurrently with, or shortly after, the
pricing of the Convertible Notes. This activity could increase (or
reduce the size of any decrease in) the market price of Zillow
Group’s Class C capital stock or the Convertible Notes at that
time, and could result in a higher effective conversion price for
the Convertible Notes.
In addition, the Option Counterparties and/or their affiliates
may modify their hedge positions by entering into or unwinding
various derivative transactions with respect to Zillow Group’s
Class C capital stock and/or by purchasing or selling Zillow
Group’s Class C capital stock or other securities of Zillow Group
in secondary market transactions following the pricing of the
Convertible Notes and prior to the maturity of the Convertible
Notes (and are likely to do so during any observation period
relating to a conversion of the Convertible Notes or in connection
with any repurchase of Convertible Notes by Zillow Group). This
activity could also cause or avoid an increase or a decrease in the
market price of Zillow Group’s Class C capital stock or the
Convertible Notes, which could affect the ability of noteholders to
convert the Convertible Notes and, to the extent the activity
occurs during any observation period related to a conversion of the
Convertible Notes, it could affect the number of shares and value
of the consideration that noteholders will receive upon conversion
of the Convertible Notes.
This offering is being made to qualified institutional buyers
pursuant to Rule 144A under the Securities Act. Neither the
Convertible Notes nor any shares of Zillow Group’s Class C capital
stock issuable upon conversion of the Convertible Notes have been
or are expected to be registered under the Securities Act or any
state securities laws and, unless so registered, may not be offered
or sold in the United States or to U.S. persons except pursuant to
an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable
state securities laws. This press release does not constitute an
offer to sell or the solicitation of an offer to buy any
securities, nor shall it constitute an offer, solicitation, or any
sale in any jurisdiction in which such offer, solicitation, or sale
is unlawful.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934 that
involve risks and uncertainties, including, without limitation,
statements regarding Zillow Group’s financing plans, including
statements related to Zillow Group’s offering of the Convertible
Notes and intended use of net proceeds of the offering. Statements
containing words such as “could,” “believe,” “expect,” “intend,”
“will,” or similar expressions constitute forward-looking
statements. Differences in Zillow Group’s actual results from those
described in these forward-looking statements may result from
actions taken by Zillow Group as well as from risks and
uncertainties beyond Zillow Group’s control. Factors that may
contribute to such differences include, but are not limited to,
risks related to whether Zillow Group will consummate the offering
of the Convertible Notes on the expected terms, or at all, market
and other general economic conditions, whether Zillow Group will be
able to satisfy the conditions required to close any sale of the
Convertible Notes, and the fact that Zillow Group’s management will
have broad discretion in the use of the proceeds from any sale of
the Convertible Notes. The foregoing list of risks and
uncertainties is illustrative, but is not exhaustive. For
information about other potential factors that could affect Zillow
Group’s business and financial results, please review the “Risk
Factors” described in Zillow Group’s Annual Report on Form 10-K for
the year ended December 31, 2015 filed with the Securities and
Exchange Commission, or SEC, and in Zillow Group’s other filings
with the SEC. Except as may be required by law, Zillow Group does
not intend, and undertakes no duty, to update this information to
reflect future events or circumstances.
About Zillow Group
Zillow Group (NASDAQ:Z) (NASDAQ:ZG) houses a portfolio of the
largest real estate and home-related brands on mobile and the web.
The company’s brands focus on all stages of the home lifecycle:
renting, buying, selling, financing and home improvement. Zillow
Group is committed to empowering consumers with unparalleled data,
inspiration and knowledge around homes, and connecting them with
the right local professionals to help. The Zillow Group portfolio
of consumer brands includes real estate and rental marketplaces
Zillow®, Trulia®, StreetEasy®, HotPads® and Naked Apartments®. In
addition, Zillow Group works with tens of thousands of real estate
agents, lenders and rental professionals, helping maximize business
opportunities and connect to millions of consumers. The company
operates a number of business brands for real estate, rental and
mortgage professionals, including Mortech®, dotloop®, Bridge
Interactive™ and Retsly®. The company is headquartered in
Seattle.
Zillow, Mortech, StreetEasy, Retsly and HotPads are registered
trademarks of Zillow, Inc. Trulia is a registered trademark of
Trulia, LLC. dotloop is a registered trademark of DotLoop, LLC.
Naked Apartments is a registered trademark of Naked Apartments,
Inc. Bridge Interactive is a trademark of Bridge Interactive Group,
LLC.
(ZFIN)
Contacts:
Raymond Jones
Investor Relations
206-470-7137
ir@zillow.com
Katie Curnutte
Public Relations
press@zillow.com
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