Linux software giant Red Hat intends to sell $700 million worth of convertible notes and has earmarked up to $400 million of the proceeds for repurchasing shares of its common stock.
The rest of the proceeds will be used for “general corporate purposes,” potentially including acquisitions, and for hedge transactions connected to issuing the convertible notes.
Raleigh-based Red Hat has unveiled three acquisitions so far this year, the most latest being a definitive agreement to acquire Ireland-based startup FeedHenry for $82.2 million.
Red Hat’s senior convertible notes would mature in 2019 and will be sold to institutional investors. The notes are ultimately convertibe to cash, shares of Red Hat common stock or a combination of the two – at Red Hat’s option.
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Initial purchasers of the notes will have an option to purchase an additional $105 million in notes under the same terms within 30 days.
Red Hat announced the note offering after the markets closed on Tuesday. As of mid-day Wednesday, Red Hat shares were trading at $56.42, up 27 cents. So far this year, its shares are essentially flat.
As of Aug. 31, Red Hat has $1.32 billion in cash.