Cadence announces intention to offer $300 million convertible senior notes

SAN JOSE, USA: Cadence Design Systems Inc. has announced its intention to commence an offering, subject to market and other conditions, of $300 million principal amount of cash convertible senior notes due 2015, to be offered and sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

Cadence intends to grant the initial purchasers of the notes an option to purchase up to an additional $50 million principal amount of notes to cover over-allotments. The notes will be convertible into cash under certain conditions.

The interest rate, conversion rate and other terms of the notes are to be determined by negotiations among Cadence and the initial purchasers of the notes. Cadence intends to enter into convertible note hedge transactions with one or more of the initial purchasers of the notes or their respective affiliates, in order to reduce its exposure under the notes to future increases in the price of Cadence common stock.

Cadence also intends to enter into separate warrant transactions with one or more of the initial purchasers of the notes or their respective affiliates, and anticipates that the warrants will have an exercise price that is up to 75 percent higher than the closing price of Cadence’s common stock on the date the warrants are issued. The issuance of the warrants could have a dilutive effect on Cadence common stock to the extent that the market price of Cadence common stock exceeds the applicable exercise price of the warrants.

Cadence intends to use up to $100 million of the net proceeds of this offering to repurchase a portion of its 1.375 percent Convertible Senior Notes due December 15, 2011, up to $100 million of the net proceeds of this offering to repurchase a portion of its 1.5 percent Convertible Senior Notes due December 15, 2013, and up to $40 million of the net proceeds of this offering to repurchase shares of its common stock through one or more of the initial purchasers or their affiliates as our agent, concurrently with the pricing of the notes. These share repurchases will be made pursuant to Cadence’s stock repurchase program.

Cadence also intends to use a portion of the net proceeds to fund the cost of the convertible note hedge transactions. Cadence intends to use the remainder of the proceeds from the sale of the notes for general corporate purposes.