California-based chipmaker Xilinx (XLNX) announced the pricing of its $520 million of 2.625% senior convertible notes due in June 2017.

The sale is expected to close on June 9, 2010. Initial purchasers of the notes will have the right to purchase up to an additional $80 million principal amount of notes, which the company states will cover, over-allotments.

Interest will be payable on the notes semiannually and the notes will be convertible upon conversion. Upon conversion, Xilinx will pay cash up to the principal amount of the notes to be converted and deliver shares as per the conversion obligations.

The initial conversion rate for the notes is 33.0164 shares of common stock per $1,000 principal amount of the notes. This equals to a conversion price of approximately $30.29 per share, a 20% conversion premium based on the closing price of Xilinx’s common stock of $25.24 per share on June 3, 2010.
 
Xilinx expects to receive net proceeds of $452.9 million from the offering, which will be used to repurchase shares for general corporate purposes.

Of the total amount received, approximately $433.3 million will be used to repurchase shares under an accelerated share repurchase program, pursuant to an agreement with one of the initial purchasers or its affiliates.

Meanwhile, Xilinx has entered into warrant transactions with affiliates of the initial purchasers of the notes, whereby it will sell warrants to purchase certain number of shares underlying the notes. The warrant transactions could have a dilutive effect to the extent that the market price of Xilinx common stock exceeds the applicable strike price of the warrants. 

Xilinx has also entered into convertible note hedge transactions with affiliates of the initial purchasers of the notes, in order to limit potential dilution from conversion of the notes.

In 2008, the Board approved a repurchase program for up to $800 million of common stock. The funds can be used to repurchase outstanding 3.125% junior subordinated convertible debentures. Xilinx repurchased 6.2 million shares for $150 million during fiscal 2010. Through April 3, 2010, the company used $424.3 million of the $800 million authorized for the share repurchases.

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