Salesforce.com Prices $1 Billion Senior Note Offering

Customer-relations management specialist Salesforce.com (NYSE: CRM  ) yesterday priced a $1 billion private placement of convertible senior notes due 2018.

Salesforce said the initial conversion rate is 3.7628 shares of stock per $1,000 of notes, or approximately $265.76 per share. Only certain specified events allow the notes to be convertible before Jan. 1, 2018, but afterwards they'll be convertible any time until they mature. Upon conversion, the notes will be settled in cash and shares of salesforce.com stock.

In connection with the offering, Salesforce entered into privately negotiated convertible-note hedge transactions with at least one of the initial purchasers while also entering into privately negotiated warrant transactions with hedge counterparties. The strike price of the warrant transactions will initially be approximately $361.58 per share, which is 200% of the closing price of salesforce.com's stock on March 12. As a whole, the convertible-note hedge transactions and the warrant transactions are expected to reduce the potential dilution to salesforce.com's stock when the notes convert.

The hedge counterparties, however, may enter into derivative transactions that could have an impact on Salesforce's stock price, and they'll be able to unwind their positions, which may adversely affect the value of the stock and the trading price of the notes.

Salesforce.com also granted the initial purchasers of the notes an option to purchase up to an additional $150 million aggregate principal amount of the notes to cover overallotments. It expects to use a portion of the proceeds for the cost of the convertible note hedge transactions and for general corporate purposes.


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