Morning Commentary: Zynga, TechTarget convertible note offerings eyed in early activity

By Abigail W. Adams

Portland, Me., Dec. 14 – The convertibles primary market continued to roll out new offerings heading into the final weeks of the year with two overnight deals on deck.

Zynga Inc. plans to price $750 million of six-year convertible notes and TechTarget Inc. plans to price $175 million of five-year convertible notes after the market close on Monday.

Both offerings looked cheap based on underwriters’ assumptions, sources said.

Zynga looks cheap

Zynga plans to price $750 million of six-year convertible notes after the market close on Monday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%.

The deal was heard to be in the market with assumptions of 275 basis points over Libor and a 38% vol., sources said.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk.

TechTarget’s acquisition

TechTarget plans to sell $175 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 0.125% to 0.625% and an initial conversion premium of 30% to 35%.

The deal was heard to be marketed with assumptions of 450 bps over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of talk, a source said.

However, proceeds will be used to fund an acquisition, which makes valuations difficult, a source said.

Approximately $150 million of net proceeds will be used to fund the cash consideration portion of its acquisition of BrightTalk Ltd. An additional $20 million will be used for the potential acquisition of a B2B information technology research and content company with which TechTarget has a non-binding letter of intent.

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