ON Semiconductor Corp Proposes $1.3 Billion Offering of Convertible Senior Notes

ON Semiconductor Corporation (Nasdaq: ON), a leading provider of intelligent power and sensing technologies, announced on May 6, 2026, its intention to undertake a significant financial maneuver by proposing a private offering of $1.3 billion of Convertible Senior Notes due in 2031. This move comes as the company continues to expand its operations in various sectors, including automotive, industrial, and AI data centers.

The proposed offering includes a principal amount of $1.3 billion in Convertible Senior Notes, which will only be available to qualified institutional buyers as per Rule 144A under the Securities Act of 1933. Additionally, ON Semiconductor plans to provide the initial purchasers an option to purchase up to an additional $200 million in notes within a 13-day period following the initial issuance.

ON Semiconductor outlined three primary uses for the net proceeds from this offering:

The company acknowledged that the concurrent repurchase of common stock might influence market pricing, potentially leading to a higher effective conversion price for the notes.

The Convertible Senior Notes will be classified as ON Semiconductor's senior unsecured obligations and will be guaranteed by certain subsidiaries. The notes are expected to offer semiannual interest payments and will mature on May 1, 2031, unless repurchased, redeemed, or converted sooner.

In terms of conversion, ON Semiconductor intends to satisfy conversion elections by paying cash up to the aggregate principal amount of the notes being converted, while the remaining obligations may be settled in cash, shares of common stock, or a combination, at the company’s discretion.

As part of the offering, ON Semiconductor anticipates entering into privately negotiated convertible note hedge agreements. These agreements are designed to cover the shares that underlie the notes, thereby mitigating potential dilution and offsetting cash payments that may exceed the principal amount upon conversion.

Additionally, the company plans to engage in warrant transactions with hedge counterparties relating to the same number of shares of common stock, which may lead to dilutive effects if the stock price exceeds the strike price of the warrants at expiration.

ON Semiconductor recognized the potential market implications of the offering. The hedge counterparties may engage in various activities, such as purchasing shares or entering into derivative transactions, which could impact the market price of both the common stock and the notes. These activities are likely to occur around the time of pricing the notes and could affect holders’ abilities to convert the notes.

In summary, while the proposed offering of Convertible Senior Notes is a strategic move for ON Semiconductor aimed at enhancing its capital structure and funding various corporate initiatives, it also introduces potential risks and market dynamics that investors will closely monitor.

As ON Semiconductor looks to solidify its position in the semiconductor market, the proposed $1.3 billion offering of Convertible Senior Notes represents a significant financial strategy. This initiative not only aims to provide the necessary capital for growth and stock repurchases but also positions the company to navigate the evolving landscape of technology and power solutions. Investors and market participants will be watching closely as ON Semiconductor executes this offering and its subsequent implications in the broader market.