SEATTLE, Dec. 07, 2016 (GLOBE NEWSWIRE) -- Zillow Group, Inc. (NASDAQ:Z) (NASDAQ:ZG) announced today the pricing of its offering of $400.0 million aggregate principal amount of 2.00% Convertible Senior Notes due 2021 (the "Convertible Notes") in a private placement under the Securities Act of 1933, as amended (the "Securities Act"). Zillow Group also granted the initial purchaser a 30-day option to purchase up to an additional $60.0 million principal amount of Convertible Notes, solely to cover over-allotments. The sale of the Convertible Notes is expected to close on December 12, 2016, subject to customary closing conditions.
Zillow Group expects that the net proceeds from this offering will be approximately $389.4 million (or $447.9 million if the initial purchaser exercises its option to purchase additional Convertible Notes in full), after deducting discounts to the initial purchaser and estimated offering expenses payable by Zillow Group. Zillow Group intends to use approximately $31.8 million of the net proceeds from the offering to pay the cost of the capped call transactions described below. Zillow Group intends to use the remainder of the net proceeds from the offering to repurchase a portion of the outstanding 2.75% Convertible Senior
Notes due 2020 of its wholly owned subsidiary, Trulia, LLC (the "Trulia Convertible Notes"), in open market or privately negotiated transactions or otherwise. If the initial purchaser exercises its over-allotment option, Zillow Group expects to use a portion of the proceeds from the sale of the additional notes to enter into additional capped call transactions and for general corporate purposes, which may include the repurchase of additional Trulia Convertible Notes, general and administrative matters, capital expenditures, and acquisitions or investments in technologies or businesses that complement its business.
The Convertible Notes will be general unsecured senior obligations of Zillow Group and will mature on December 1, 2021, unless earlier
repurchased, redeemed or converted in accordance with their terms. The Convertible Notes will bear interest at a fixed rate of 2.00% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2017.
Prior to the close of business on the business day immediately preceding September 1, 2021, the Convertible Notes are convertible at the option of the holders only under certain conditions. On or after September 1, 2021, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at their option at the conversion rate then in effect, irrespective of these conditions. Zillow Group will settle conversions of the Convertible Notes
by paying or delivering, as the case may be, cash, shares of its Class C capital stock, or a combination of cash and shares of its Class C capital stock, at its election.
The conversion rate will initially be 19.0985 shares of Class C capital stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $52.36 per share of Class C capital stock). The conversion rate and the corresponding conversion price will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. Zillow Group may redeem for cash all or part of the Convertible Notes, at its option, on or after December 6, 2019, under certain circumstances at a redemption price equal to 100% of the principal amount of the Convertible
Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date (as defined in the indenture governing the Convertible Notes).
If Zillow Group undergoes a fundamental change (as defined in the indenture governing the Convertible Notes), holders may require Zillow Group to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the indenture governing the Convertible Notes). In addition, if certain fundamental changes occur, Zillow Group may be required in certain circumstances to
increase the conversion rate for any Convertible Notes converted in connection with such fundamental changes by a specified number of shares of its Class C capital stock.
In connection with the pricing of the Convertible Notes, Zillow Group has entered into privately negotiated capped call transactions with Citigroup Global Markets Inc. and certain other financial institutions (the "Option Counterparties"). The capped call transactions are expected generally to reduce the potential dilution to Zillow Group's Class C capital stock upon any conversion of Convertible Notes and/or offset the cash payments Zillow Group is required to make in excess of the principal amount of the Convertible Notes in the event that the
market price of Zillow Group's Class C capital stock is greater than the strike price of the capped call transactions (which initially corresponds to the initial conversion price of the Convertible Notes and is subject to certain adjustments under the terms of the capped call transactions), with such reduction and/or offset subject to a cap based on the cap price of the capped call transactions. The capped call transactions will cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of shares of Zillow Group's Class C capital stock that will underlie the Convertible Notes. In addition, the capped call transactions provide for Zillow Group to elect, subject to certain conditions, for the capped call transactions to remain outstanding (with certain modifications)
following its election to redeem the Convertible Notes, notwithstanding any conversions of Convertible Notes in connection with such redemption.
Zillow Group expects that, in connection with establishing their initial hedges of the capped call transactions, the Option Counterparties and/or their respective affiliates will enter into various derivative transactions with respect to Zillow Group's Class C capital stock and/or purchase shares of Zillow Group's Class C capital stock concurrently with, or shortly after, the pricing of the Convertible Notes. This activity could increase (or reduce the size of any decrease in) the market price of Zillow Group's Class C capital stock or the Convertible Notes at that time, and could result in a higher effective conversion price for the Convertible Notes.
In addition, the Option
Counterparties and/or their affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Zillow Group's Class C capital stock and/or by purchasing or selling Zillow Group's Class C capital stock or other securities of Zillow Group in secondary market transactions following the pricing of the Convertible Notes and prior to the maturity of the Convertible Notes (and are likely to do so during any observation period relating to a conversion of the Convertible Notes or in connection with any repurchase of Convertible Notes by Zillow Group). This activity could also cause or avoid an increase or a decrease in the market price of Zillow Group's Class C capital stock or the Convertible Notes, which could affect the ability of
noteholders to convert the Convertible Notes and, to the extent the activity occurs during any observation period related to a conversion of the Convertible Notes, it could affect the number of shares and value of the consideration that noteholders will receive upon conversion of the Convertible Notes.
This offering is being made to qualified institutional buyers pursuant to Rule 144A under the Securities Act. Neither the Convertible Notes nor any shares of Zillow Group's Class C capital stock issuable upon conversion of the Convertible Notes have been or are expected to be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States or to U.S. persons except pursuant to an exemption from, or in
a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall it constitute an offer, solicitation, or any sale in any jurisdiction in which such offer, solicitation, or sale is unlawful.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding Zillow Group's financing plans, including statements related to Zillow Group's offering of the Convertible Notes and intended use of net proceeds of the offering. Statements containing words such as "could,"
"believe," "expect," "intend," "will," or similar expressions constitute forward-looking statements. Differences in Zillow Group's actual results from those described in these forward-looking statements may result from actions taken by Zillow Group as well as from risks and uncertainties beyond Zillow Group's control. Factors that may contribute to such differences include, but are not limited to, risks related to whether Zillow Group will consummate the offering of the Convertible Notes on the expected terms, or at all, market and other general economic conditions, whether Zillow Group will be able to satisfy the conditions required to close any sale of the Convertible Notes, and the fact that Zillow Group's management will
have broad discretion in the use of the proceeds from any sale of the Convertible Notes. The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. For information about other potential factors that could affect Zillow Group's business and financial results, please review the "Risk Factors" described in Zillow Group's Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission, or SEC, and in Zillow Group's other filings with the SEC. Except as may be required by law, Zillow Group does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.
About Zillow Group
Zillow Group (NASDAQ:Z) (NASDAQ:ZG) houses a portfolio of the largest real estate and home-related brands on mobile and the web. The company's brands focus on all stages of the home lifecycle: renting, buying, selling, financing and home improvement. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with the right local professionals to help. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow®, Trulia®, StreetEasy®, HotPads® and Naked Apartments®. In addition, Zillow Group works with tens of thousands of real estate agents,
lenders and rental professionals, helping maximize business opportunities and connect to millions of consumers. The company operates a number of business brands for real estate, rental and mortgage professionals, including Mortech®, dotloop®, Bridge Interactive™ and Retsly®. The company is headquartered in Seattle.
Zillow, Mortech, StreetEasy, Retsly and HotPads are registered trademarks of Zillow, Inc. Trulia is a registered trademark of Trulia, LLC. dotloop is a registered trademark of DotLoop, LLC. Naked Apartments is a registered trademark of Naked Apartments, Inc. Bridge Interactive
is a trademark of Bridge Interactive Group, LLC.
Source: Zillow Group, Inc.
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