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Blackhawk Network Holdings prices $460M of convertible notes

BlackhawkNetwork Holdings Inc. priced its offering of $460 million aggregate principal amount ofits 1.50% convertible senior notes due 2022 through a private placement.

The initial purchasers were granted an option to purchase upto an additional $40 million principal amount of notes, solely to cover anyoverallotments.

The offering is expected to close July 27.

Blackhawk has entered into privately negotiated convertible notehedge transactions and warrant transactions with affiliates of several initialpurchasers of the notes, or the option counterparties. If the initialpurchasers exercise their overallotment option, the company expects to enterinto additional convertible note hedge transactions and additional warranttransactions with the option counterparties.

The option counterparties, or their respective affiliates,expect to enter into various derivative transactions with respect toBlackhawk's common stock and/or purchase the company's common sharesconcurrently with or shortly after the pricing of the notes. Also, the optioncounterparties, or their respective affiliates, may modify their hedgepositions by entering into or unwinding several derivative transactions withrespect to Blackhawk's common stock and/or purchasing or selling the company'scommon stock or other securities in secondary market transactions following thepricing of the notes and prior to the maturity of the notes.

The notes will be senior unsecured obligations of Blackhawkand will be convertible into cash, the company's common shares, or acombination thereof, at the company's option.

Blackhawk expects to use about $372 million of net proceedsto repay borrowings under its credit facility, about $26.5 million of the netproceeds to pay the cost of the convertible note hedge transactions and theremainder to repurchase the company's common shares from certain purchasers ofthe notes, to pay related transaction fees and expenses, and for general corporatepurposes, including future acquisitions.

The notes will bear interest at a rate of 1.50% per year,payable semiannually in arrears. The initial conversion rate is 20.0673 commonshares for each $1,000 principal amount of the notes, which equates to aninitial conversion price of about $49.83 per common share. The initialconversion price represents a premium of about 42.5% to the $34.97 closing saleprice of Blackhawk common stock on the NASDAQ Global Select Market on July 21.

Blackhawk expects to use about $35 million of the netproceeds to repurchase common shares from purchasers of notes through privatelynegotiated transactions concurrently with the notes offering effected throughone of the initial purchasers. The company expects to repurchase such shares ata purchase price per share equal to the closing price per share of thecompany's common stock on the date the offering of notes was priced, which is$34.97 per share.