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
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.
LINUX is a trademark of Linus Torvalds. RED HAT is a registered trademark of Red Hat, Inc. All other names and trademarks are the property of their respective owners.
- About Red Hat
Red Hat is the world’s leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As the connective hub in a global network of enterprises, partners, and open source communities, Red Hat helps create relevant, innovative technologies that liberate resources for growth and prepare customers for the future of IT. Learn more at http://www.redhat.com.
- Forward-Looking Statements
Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: risks related to delays or reductions in information technology spending; the effects of industry consolidation; the ability of the Company to compete effectively; the integration of acquisitions and the ability to market successfully acquired technologies and products; uncertainty and adverse results in litigation and related settlements; the inability to adequately protect Company intellectual property and the potential for infringement or breach of license claims of or relating to third party intellectual property; the ability to deliver and stimulate demand for new products and technological innovations on a timely basis; risks related to data and information security vulnerabilities; ineffective management of, and control over, the Company’s growth and international operations; fluctuations in exchange rates; and changes in and a dependence on key personnel, as well as other factors contained in our most recent Quarterly Report on Form 10-Q (copies of which may be accessed through the Securities and Exchange Commission’s website at http://www.sec.gov), including those found therein under the captions "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations". In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic and political conditions, governmental and public policy changes and the impact of natural disasters such as earthquakes and floods. The forward-looking statements included in this press release represent the Company’s views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this press release.
