On February 27, 2026, Ultra Clean Holdings, Inc. (Nasdaq: UCTT) announced the successful pricing of its offering of $525.0 million in aggregate principal amount of 0.00% convertible senior notes due 2031. This offering, which was increased from an initially announced size of $400.0 million, is being conducted privately for qualified institutional buyers in compliance with Rule 144A under the Securities Act of 1933. The issuance and sale of these notes are set to settle on March 3, 2026, pending customary closing conditions.

2. Use of Proceeds

Ultra Clean anticipates net proceeds from the offering to be approximately $511.1 million, or up to $584.2 million if the initial purchasers exercise their option to purchase an additional $75.0 million in principal amount of notes. The company intends to allocate the net proceeds as follows:

Capped Call Transactions: Approximately $21.9 million will be used to fund costs associated with entering into capped call transactions.

Share Repurchases: About $40.0 million is earmarked for repurchasing 672,608 shares of Ultra Clean's common stock.

General Corporate Purposes: The remaining proceeds will support working capital, the prepayment of a portion of the company’s outstanding term loan under its amended credit agreement, and other corporate uses.

3. Details of the Notes

The convertible senior notes will be unsecured obligations of Ultra Clean, offering no regular interest payments and a principal amount that does not accrete. The notes are set to mature on March 15, 2031, unless repurchased, redeemed, or converted before this date. Notably, before December 16, 2030, noteholders can only convert their notes under specific conditions. After this date, conversions are allowed at the noteholders' discretion until two trading days before maturity.

The initial conversion rate is set at 11.8001 shares of common stock per $1,000 principal amount of notes, translating to an initial conversion price of approximately $84.75 per share. This price represents a premium of around 42.5% over the last reported sale price of $59.47 per share as of February 26, 2026.

4. Redemption and Fundamental Changes

The notes are redeemable in whole or in part from March 20, 2029, provided certain conditions are met, including that Ultra Clean's common stock price exceeds 130% of the conversion price for a specified period. Should a "fundamental change" occur, noteholders may require Ultra Clean to repurchase their notes for cash.

5. Capped Call Transactions

Ultra Clean has entered into capped call transactions with certain initial purchasers and other financial entities. These transactions are designed to reduce potential dilution to Ultra Clean's common stock upon conversion of the notes and offset any potential cash payments exceeding the principal amount of the converted notes. The initial cap price for these transactions is set at $104.0725 per share, a notable 75% premium over the last sale price of Ultra Clean's common stock.

6. Market Implications

The pricing and subsequent activities surrounding this offering are expected to influence the market for Ultra Clean's common stock and notes. The company's share repurchase program, which coincides with the notes offering, may lead to fluctuations in the stock price, potentially resulting in a higher effective conversion price for the notes.

Conclusion

Ultra Clean Holdings Inc.'s upsize of its convertible senior notes offering reflects strong market demand and the company's proactive financial strategy. By utilizing the proceeds for share repurchases and other strategic purposes, Ultra Clean aims to enhance shareholder value while positioning itself for future growth. The upcoming settlement of this offering and the implementation of capped call transactions will be closely monitored by investors and analysts alike.

Original press release