ZTO Express-W (02057) announced its intention to issue, subject to market conditions and other factors, a total of $1.5 billion in principal amount of convertible senior notes due 2031. The offering will be conducted offshore to non-U.S. persons who are qualified institutional buyers, in accordance with Regulation S of the U.S. Securities Act.
The company plans to allocate the net proceeds from the notes offering, after deducting underwriting commissions and estimated expenses, for several purposes. These include refinancing to fund recent market repurchases of its A类普通股 and/or American Depositary Shares under its share repurchase plan, paying premiums for concurrent share repurchases and capped call transactions, and for general corporate purposes.
Concurrently with the pricing of the notes, the company expects to enter into capped call transactions with one or more initial purchasers and/or their affiliates or other financial institutions. These counterparties are expected to act independently of the company and its affiliates. The capped call transactions are generally intended to reduce potential dilution to the A类普通股 upon conversion of the notes and/or offset any cash payments the company must make exceeding the principal amount of converted notes, subject to a cap.
To establish their initial hedge positions for the capped call transactions, the counterparties or their affiliates are expected to purchase hedges and/or engage in various derivative transactions with respect to the A类普通股 around the time of the notes pricing. This activity could increase, or reduce the extent of any decrease in, the market price of the A类普通股, ADSs, the company's other securities, or the notes at that time.
Furthermore, the counterparties or their affiliates may adjust their hedge positions after the pricing and before the maturity of the notes by entering into or unwinding various derivatives or by buying or selling the ADSs, A类普通股, notes, or other securities in secondary market transactions. The impact of such activity on the market price of the A类普通股 or ADSs is uncertain and depends on various factors, including market conditions.
Any such activity could cause or avoid an increase or decrease in the prices of the ADSs, A类普通股, other securities, or the notes, which may affect whether holders convert their notes and the value they receive upon conversion. The counterparties may engage in or cease these activities at any time at their sole discretion, without notice to the company.
The counterparties are expected to source the A类普通股 to be delivered under the capped call transactions, if exercised, from their hedge positions or market purchases in the ordinary course of their hedging activities.
Simultaneously with the notes pricing, the company plans to conduct a "concurrent share repurchase," buying back a predetermined number of its A类普通股 from certain note purchasers in privately negotiated, off-exchange transactions. This repurchase is intended to facilitate the initial hedging activities of note purchasers who wish to hedge their investment.
The concurrent share repurchase will be executed under the company's existing share repurchase plan, which is valid until June 30, 2026. The purchase price for the concurrent repurchase is expected to be the closing price of the A类普通股 on the Hong Kong Stock Exchange on February 4, 2026.
In addition to the concurrent repurchase, the company may also repurchase additional A类普通股 and/or ADSs in the open market after the notes offering closes, in compliance with applicable laws and regulations. Both the concurrent repurchase and any future market repurchases will be funded from the net proceeds of the notes offering and are collectively intended to offset potential dilution to holders of the company's ordinary shares upon conversion of the notes.
A portion of the proceeds from the notes offering will be used to fund the concurrent share repurchase. The issuance of the notes constitutes a major transaction, while the concurrent repurchase is primarily intended to facilitate the note purchasers' establishment of initial short positions, thereby enabling their participation in the notes offering.
The concurrent share repurchase is also expected to have the ancillary effect of mitigating the negative share price impact often observed after the announcement of a convertible notes offering, and it is generally intended to reduce some of the potential dilution to ordinary shareholders upon conversion of the notes.
The company's Board of Directors believes that this repurchase activity reflects the confidence of the board and management team in the company's long-term strategy and growth. The board considers the share repurchase to be in the best interests of the company and its shareholders as a whole, and not intended to provide an exit opportunity for selected shareholders.
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