The debentures are being sold at 100% of their principal amount. The sale of the debentures is expected to close on January 12, 2004, subject to customary closing conditions. The initial purchaser has an option to purchase up to an additional $100 million aggregate principal amount of the debentures. The debentures will be Red Hat's senior unsecured obligations and will be subordinated in right of payment to all of its existing and future secured debt. Red Hat expects to use the net proceeds for general corporate purposes, including possible acquisitions of complementary businesses and technologies and the expansion of its international operations.
The debentures will bear interest at a rate of 0.50% per annum, payable on each January 15 and July 15, beginning on July 15, 2004. The debentures will mature on January 15, 2024, unless earlier converted, redeemed by Red Hat at its option or repurchased by Red Hat at the option of the holders. Each $1,000 principal amount of the debentures will be initially convertible under certain circumstances into 39.0753 shares of Red Hat common stock. Therefore, the debentures are convertible in the aggregate into approximately 19,537,650 shares of Red Hat common stock, or approximately 23,445,180 shares of Red Hat common stock if the initial purchaser exercises its option to purchase additional debentures in full. The conversion rate is equivalent to a conversion price of approximately $25.59 per share, subject to adjustment. This represents approximately a 37% conversion premium based on the last reported bid price of $18.68 of Red Hat common stock on January 6, 2004. The debentures will be redeemable by Red Hat beginning in January 2009 and investors will have the right to require Red Hat to repurchase the debentures in January 2009, 2014 and 2019 and upon certain repurchase events.
The debentures have been offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended. The debentures and the shares of Red Hat common stock issuable upon the conversion of the debentures have not been registered under the Securities Act and may not be offered or sold in the United States or to a U.S. person absent registration or an applicable exemption from registration requirements.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering would be unlawful.
About Red Hat, Inc.
Red Hat, the world's leading open source and Linux provider, is headquartered in Raleigh, NC with satellite offices spanning the globe. Red Hat is leading Linux and open source solutions into the mainstream by making high quality, low cost technology accessible. Red Hat provides operating system software along with middleware, applications and management solutions. Red Hat also offers support, training and consulting services to its customers worldwide and through top-tier partnerships. Red Hat's open source strategy offers customers a long term plan for building infrastructures that are based on and leverage open source technologies with focus on security and ease of management. Learn more: http://www.redhat.com
Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, management's plans and objectives for future operations, and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, reliance upon strategic relationships, management of growth, the possibility of undetected software errors, the risks of economic downturns generally, and in Red Hat's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's Web site at http://www.sec.gov.
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