XML 19 R23.htm IDEA: XBRL DOCUMENT  v2.3.0.11
SUBSEQUENT EVENTS
3 Months Ended
Jun. 30, 2011
SUBSEQUENT EVENTS  
SUBSEQUENT EVENTS

(18) SUBSEQUENT EVENTS

 

PopCap Games, Inc. Acquisition

 

On July 11, 2011, we entered into an agreement to acquire all of the outstanding shares of PopCap Games, Inc. Under the terms of the agreement, we will pay (1) approximately $650 million in cash, (2) approximately $100 million in privately placed shares of our common stock to the founders and chief executive officer of PopCap, and (3) up to approximately $50 million in long-term equity retention arrangements in the form of restricted stock unit awards and options to acquire our common stock to be granted over the next four years to PopCap employees joining us. PopCap is a leading provider of games for mobile phones, tablets, PCs, and social network sites. This acquisition accelerates our participation in social gaming and contributes to our digital business. The purchase price is subject to upward adjustment for the amount of unrestricted cash held by PopCap at the closing and downward adjustment for any indebtedness of PopCap and for certain transaction expenses incurred by PopCap in connection with the acquisition.

 

In addition, we may be required to pay additional variable cash consideration that is contingent upon the achievement of certain performance milestones through December 31, 2013. The additional consideration is limited to a maximum of $550 million.

 

Offering of $632.5 million 0.75% Convertible Senior Notes Due 2016

 

On July 14, 2011, we entered into a Purchase Agreement (the "Purchase Agreement") with Morgan Stanley & Co. LLC, as representative of the initial purchasers (collectively, the "Initial Purchasers") with respect to the offer and sale of $550 million aggregate principal amount of our 0.75% Convertible Senior Notes due 2016 (the "Firm Notes"). We also granted the Initial Purchasers an option to purchase up to an additional $82.5 million principal amount of notes (the "Additional Notes" and together with the Firm Notes, the "Notes") solely to cover over-allotments. The Initial Purchasers exercised their option to purchase the maximum amount of the Additional Notes on July 15, 2011. The Purchase Agreement includes customary representations, warranties and covenants. Under the terms of the Purchase Agreement, we have agreed to indemnify the Initial Purchasers against certain liabilities.

 

Also on July 14, 2011, in connection with the pricing of the Notes, and on July 18, 2011, in connection with the Initial Purchasers' exercise of their over-allotment option, we entered into privately negotiated convertible note hedge transactions (the "Hedge Transactions") with certain option counterparties (the "Option Counterparties"). The Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 19.9 million shares of our common stock, which is equal to the number of shares of our common stock that will initially underlie the Notes. These transactions are expected to reduce the potential dilution with respect to our common stock upon conversion of the Notes. Separately, we have also entered into privately negotiated warrant transactions with the Option Counterparties to purchase, subject to customary anti-dilution adjustments, approximately 19.9 million shares of our common stock, with a strike price of $41.14 (the "Warrant Transactions"). The Warrant Transactions will have a dilutive effect with respect to our common stock to the extent that the market price per share of its common stock exceeds the strike price of the warrants on or prior to the expiration date of the warrants. Our cost of the Hedge Transactions, after taking into account our proceeds from the Warrant Transactions, is approximately $42.3 million.

 

On July 20, 2011, in connection with the issuance of the Notes, we entered into an Indenture (the "Indenture") with respect to the Notes with U.S. Bank National Association, as Trustee (the "Trustee"). Under the Indenture, the Notes will be our senior unsecured obligations and will pay interest semiannually at a rate of 0.75 percent per annum. The Notes will be convertible into shares of our common stock at an initial conversion rate of 31.5075 shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $31.74 per share). The initial conversion price represents a premium of 35 percent to the $23.51 per share closing price of our common stock on July 14, 2011.

 

Prior to April 15, 2016, the notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the notes. Interest on the notes will be payable semiannually in arrears at a rate of 0.75 percent per annum on January 15 and July 15 of each year, beginning on January 15, 2012. The notes will mature on July 15, 2016, unless previously purchased or converted in accordance with their terms prior to such date.

 

The conversion rate is subject to customary anti-dilution adjustments, but will not be adjusted for any accrued and unpaid interest. Following certain corporate events described in the Indenture that occur prior to the maturity date, the conversion rate will be increased for a holder who elects to convert its Notes in connection with such corporate event in certain circumstances.

The notes are not redeemable prior to maturity, and no sinking fund is provided for the Notes.

 

Upon conversion of the Notes, holders will receive cash up to the principal amount of each Note, and any excess conversion value will be delivered in shares of our common stock.

 

If we undergo a "fundamental change," as defined in the Indenture, subject to certain conditions, holders may require us to purchase for cash all or any portion of their Notes. The fundamental change purchase price will be 100 percent of the principal amount of the Notes to be purchased plus any accrued and unpaid interest up to but excluding the fundamental change purchase date.

 

The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25 percent in principal amount of the outstanding Notes may declare 100 percent of the principal and accrued and unpaid interest on all the Notes to be due and payable.