File photo: Southern Company Gas signage at the entrance to Ten Peachtree Place in Atlanta, December 14, 2019. Southern Company Gas is a Southern Company subsidiary. Photo: JJonahJackalope / Wikimedia Commons / CC BY-SA 4.0. Cropped and resized. Adapted image: CC BY-SA 4.0.
Southern Company said Thursday evening that it priced a $1.75 billion offering of equity units, with the financing expected to close November 17, subject to customary conditions.
The energy company is offering 35 million units at a stated amount of $50 each, according to its 7:26 p.m. Eastern pricing announcement. Each unit combines a contract to buy Southern Company common stock in the future with interests in two series of senior notes due in 2031 and 2034.
Southern Company estimated net proceeds of about $1.724 billion after underwriting discounts and commissions, but before other offering expenses. Underwriters have an option to buy up to 5 million additional units, representing another $250 million in stated amount. If that option is exercised in full, estimated net proceeds would rise to about $1.970 billion.
The company plans to use about $135.3 million of the proceeds to repurchase approximately $125.8 million in principal amount of convertible senior notes due in June 2027. It intends to use the remaining proceeds to repay some or all of its short-term debt and for general corporate purposes, including investments in subsidiaries.
Total annual distributions on the new units will be 8.625%, combining interest on the notes and payments under the stock purchase contracts. The reference price is $92.47 per share, and the threshold appreciation price is $115.58, a premium of about 25%.
Under the purchase contracts, holders must buy a variable number of Southern Company common shares no later than December 15, 2029, or the following business day if that date is not a business day. BofA Securities and Barclays are joint book-running managers.
The offering has been priced but has not yet closed. Southern Company serves 9 million customers through its electric, natural gas and other businesses, according to the company.
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