News: Optoelectronics
4 September 2025
Lumentum announces pricing of $1.1bn convertible notes offering
Lumentum Holdings Inc of San Jose, CA, USA (which designs and makes optical and photonic products for optical networks and lasers for industrial and consumer markets) has announced the pricing of $1.1bn worth of convertible senior notes (due 2032) in a private placement to qualified institutional buyers (pursuant to Rule 144A under the Securities Act of 1933, as amended). The firm has also granted the initial purchasers a 13-day option to purchase up to an additional $165m of the notes.
The sale to the initial purchasers is expected to settle on 8 September (subject to customary closing conditions) and to result in about $1.09bn (or $1.25bn, if the initial purchasers fully exercise their option to purchase additional notes) in net proceeds (after deducting the initial purchasers’ discount and estimated offering expenses payable by Lumentum).
The notes will be senior, unsecured obligations of Lumentum. They will bear interest at a rate of 0.375% per year, payable semi-annually in arrears on 15 March and 15 September of each year, beginning on 15 March 2026. The notes will mature on 15 March 2032, unless earlier converted, redeemed or repurchased.
Lumentum intends to use about $88.7m of the net proceeds to pay the cost of the capped-call transactions described below. It also intends to use some to repurchase about $581.1m of its 0.50% convertible senior notes (due 2026), including accrued and unpaid interest on the 2026 notes, using about $843.8m of the net proceeds concurrently with the pricing of the offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as its agent. Lumentum intends to use the remaining net proceeds for general corporate purposes, which may include the repayment or repurchase of its indebtedness (including any of its existing convertible notes), capital expenditures, working capital and potential acquisitions. From time to time, Lumentum evaluates potential acquisitions of businesses, technologies or products. Currently, however, it does not have any definitive agreements with respect to any pending material acquisitions.
Holders of the 2026 notes that are repurchased in the concurrent repurchases described above may purchase shares of common stock in the open market to unwind any hedge positions they may have with respect to the 2026 notes. These activities may affect the trading price of common stock and the initial conversion price of the notes.
The initial conversion rate is 5.3257 shares of common stock per $1000 worth of notes (equivalent to an initial conversion price of about $187.77 per share) and is subject to adjustment upon the occurrence of certain events. Prior to the close of business on the business day immediately preceding 15 December 2031, the notes will be convertible at the option of the noteholders upon satisfaction of specified conditions and during certain periods. Thereafter, until the close of business on the second scheduled trading day preceding the maturity date, the notes will be convertible at the option of the noteholders at any time regardless of these conditions. Upon conversion, Lumentum will pay cash up to the total amount of the notes to be converted and pay or deliver (as the case may be) cash, shares of common stock or a combination of cash and shares, at Lumentum’s election, in respect of the remainder (if any) of its conversion obligation in excess of the total amount of notes being converted. The initial conversion price represents a premium of about 40% over the last reported sale price of the common stock on 3 September of $134.12 per share.
Lumentum may redeem for cash all or any portion of the notes, at its option (subject to certain limitations), on or after 20 March 2029, if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which Lumentum provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes.
In connection with the pricing of the notes, Lumentum entered into privately negotiated capped-call transactions with certain initial purchasers and/or their respective affiliates and certain other financial institutions (the option counterparties). The capped-call transactions will cover (subject to customary anti-dilution adjustments substantially similar to those applicable to the notes) the number of shares of common stock that will initially underlie the notes. The capped-call transactions are generally expected to reduce potential dilution to the common stock upon any conversion of the notes and/or offset any cash payments that Lumentum must make in excess of the principal amount of converted notes (as the case may be) with such reduction and/or offset subject to a cap. The cap price of the capped-call transaction will initially be $268.24 per share (a premium of 100% over the last reported sale price of the common stock of $134.12 per share on the Nasdaq Global Select Market on 3 September) and is subject to certain adjustments under the terms of the capped-call transactions.
Lumentum has been advised that, in connection with establishing their initial hedges of the capped-call transactions, the option counterparties or their respective affiliates may enter into various derivative transactions with respect to the common stock and/or purchase shares of the common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the common stock or the notes at that time. In addition, Lumentum has been advised to expect that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to the common stock and/or purchasing or selling the common stock or other securities of Lumentum in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during the observation period related to a conversion of the notes, in connection with any redemption or fundamental change repurchase of the notes and, to the extent that Lumentum unwinds a corresponding portion of the capped call transactions, following any other repurchase of the notes). This activity could also cause or prevent an increase or a decrease in the market price of the common stock or the notes, which could affect the ability of noteholders to convert the notes and (to the extent the activity occurs during any observation period related to a conversion of the notes) it could affect the amount and value of the consideration that noteholders will receive upon conversion of the notes.
If the initial purchasers exercise their option to purchase additional notes, Lumentum expects to use a portion of the net proceeds from the sale of such additional notes to enter into additional capped-call transactions.
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