Carbonite Raises $125M to Pay Off Debt, Scout Acquisitions

Carbonite, a publicly traded cloud backup and data protection firm, is raising $125 million from investors to pay off debt and restock its war chest.

The Boston-based company (NASDAQ: CARB) announced it’s conducting a private offering of convertible senior notes to institutional investors. The initial buyers have a 30-day option to purchase an additional $18.75 million worth of notes to cover over-allotments.

The initial conversion price for the notes is equal to $25.84 per share of Carbonite’s common stock, which is a 32.5 percent premium over its $19.50 per share closing stock price on Wednesday.

The notes have an interest rate of 2.5 percent per year, payable twice a year starting October 1, Carbonite says. The notes will mature on April 1, 2022, unless repurchased, redeemed, or converted before that date.

Carbonite says it plans to use about $40 million of the net proceeds from the offering to pay off all the remaining debt under its revolving credit facility, which will then be terminated. It will use another $15 million to repurchase common stock from buyers of the convertible notes in the private offering.

The rest of the earnings from the offering will fund general business activities—including potential acquisitions, Carbonite says. The company has made several acquisitions in recent years, including buying Double-Take Software for $65.25 million in January.

Convertible note offerings by public companies aren’t unusual. Firms like Tesla (NASDAQ: TSLA), Salesforce (NYSE: CRM), and Workday (NYSE: WDAY) have used this mechanism to raise hundreds of millions of dollars in recent years.

But the strategy is “not ideal for everyone,” says Carbonite CEO Mohamad Ali. It’s “best for growing public companies that are already financially strong,” he says in an e-mail to Xconomy. For Carbonite, this approach made more sense than selling equity because “the debt converts to equity at a premium,” he adds.

Carbonite went public in 2011 at $10 per share, raising $62.5 million in its IPO. Since then its stock has mostly traded between $7 and $15 per share. But over the past year, it has been on the upswing and trading higher than ever—the stock peaked at $21.50 per share on March 8.

Carbonite has a market value of $545 million, as of this writing. The company was founded in 2005 by David Friend and Jeff Flowers.

Xconomy’s Greg Huang contributed to this report.

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