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Knowles Announces Pricing of Upsized $150 Million Convertible Notes Offering

ITASCA, Ill., Apr 28, 2016 (BUSINESS WIRE) -- Knowles Corporation KN, +1.31% today announced the pricing of $150 million aggregate principal amount of convertible senior notes due 2021 (the "notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Act"). The size of the offering was increased by $25 million from the previously announced offering size of $125 million. Knowles also granted the initial purchasers of the notes a 30-day option to purchase up to an additional $22.50 million aggregate principal amount of the notes. The sale of the notes to the initial purchasers is expected to settle on May 4, 2016, subject to customary closing conditions, and is expected to result in approximately $144.25 million in net proceeds to Knowles after deducting the initial purchasers' discount and estimated offering expenses payable by Knowles (assuming no exercise of the initial purchasers' option). J.P. Morgan is acting as sole book-running manager and BofA Merrill Lynch is acting as joint lead manager for the offering.

The notes will be unsecured, senior obligations of Knowles and will bear interest at a rate of 3.25% per year. Interest will be payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2016. The notes will mature on November 1, 2021, unless earlier repurchased or converted. Conversions of the notes will be settled in cash, shares of Knowles' common stock or a combination thereof, at Knowles' election.

Knowles expects to use $4.68 million of the net proceeds of the offering of the notes to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds to Knowles from the warrant transactions described below) and to use the remaining proceeds of the offering to reduce borrowings outstanding under Knowles’ term loan facility.

The initial conversion rate for the notes is 54.2741 shares of Knowles’ common stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $18.42 per share). Prior to the close of business on the business day immediately preceding August 1, 2021, the notes will be convertible at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods. Thereafter until the close of business on the second scheduled trading day immediately preceding the maturity date...