ON Semiconductor issues $1.5B convertible notes, hedges dilution but adds warrant risk above $211

In connection with the pricing of the Notes on May 6, 2026, and in connection with the exercise by the initial purchasers of their option to purchase additional Notes on May 8, 2026, the Company entered into privately negotiated convertible note hedge transactions (collectively, the “Convertible Note Hedges”) with respect to the Common Stock with certain of the initial purchasers or their affiliates and certain other financial institutions (collectively, the “Counterparties”). The Convertible Note Hedges cover, subject to customary anti-dilution adjustments, the number of shares of Common Stock that initially underlie the Notes, and are expected to reduce the potential dilution to the Common Stock and/or offset potential cash payments in excess of the principal amount upon conversion of the Notes.

If the market value per share of the Common Stock, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on the Company’s earnings per share. Additionally, if the market value per share of the Common Stock, as measured under the Warrants, exceeds the strike price of the Warrants during the measurement period at the maturity of such Warrants, the Company will owe the Counterparties a number of shares of the Common Stock in an amount based on the excess of such market price per share of the Common Stock over the strike price of the Warrants.

The offer and sale of the Notes and the guarantees to the initial purchasers were made in reliance on the exemption from registration provided by Section 4(a) (2) of the Securities Act of 1933, as amended (the “Securities Act”), and for resale by the initial purchasers to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act.

The Company sold the Warrants described below to the Counterparties (as defined below) in reliance on the exemption from registration provided by Section 4(a) (2) of the Securities Act.

Any shares of Common Stock issuable upon conversion of the Notes will be issued in transactions anticipated to be exempt from registration under the Securities Act pursuant to Section 3(a) (9) thereof.

The Company received net proceeds from the offering of the Notes of approximately $1,472.9 million, after deducting the initial purchasers’ discounts and after deducting offering expenses payable by the Company. The Company intends to use a portion of the net proceeds from the offering of the Notes to pay the approximately $70.7 million cost of the Convertible Note Hedges (as defined below) (after such cost is partially offset by the proceeds to the Company from the sale of the Warrants (as defined below). The Company used approximately $331.9 million of the net proceeds from this offering to repurchase approximately 3.1 million shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), concurrently with the pricing of the offering of the Notes in privately negotiated transactions effected with or through one of the initial purchasers or its affiliate. The Company expects to use the remainder of the net proceeds for general corporate purposes, including the repayment of outstanding indebtedness.

The Company may redeem for cash all or any portion of the Notes, at the Company’s option at any time and from time to time, on or after May 7, 2029 if the last reported sale price of the 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 consecutive 30 trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the related notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.