Red Hat Plans $700 Million Convertible Note Offer, $400 Million Stock Buyback

   By Tess Stynes 
 

Red Hat Inc. (RHT) plans to offer $700 million of convertible senior notes that mature in 2019 to raise funds to repay the cost of hedge transactions and other purposes, with $400 million of the proceeds targeted to repurchase the software company' stock.

Red Hat, best known for its enterprise Linux OpenStack platform, said initial purchasers also will have an option for an additional $105 million of notes under the same conditions as the main offer. If purchasers exercise their options for the additional notes, Red Hat also plans to sell additional warrants and use the combined proceeds for additional convertible note hedge transactions and related warrant transactions.

The stock repurchases will include the buybacks of $275 million of Red Hat's shares under an accelerated share repurchase agreement with Goldman Sachs Group Inc. (GS).

Red Hat said it intends to use the remaining net proceeds for working capital and general corporate purposes, which may include capital expenditures, potential acquisitions or strategic transactions.

The company recently reported that its profit rose 15% in the quarter ended Aug. 31 as strong business from its certified public cloud providers helped lead to higher-than-expected revenue.

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