06-24-14 Palo Alto Networks (PANW)

$500m (+75m) sen unsec cb coming tonite from JPM/CITI/RBC. Terms 5y,0-½ up 35-40%, full pctns.UOP=note hedge/acq/gcp.$6bn global network security provider founded in ’05. Stk +40% since 05/14 low (+7% on back of solid 3Q results;Rev +49% yoy, billings +46% & the highest new customer acq vs any prev qtr. It also agreed to settle w/JNPR (paying $75m cash & $100m in PANW stk/warrants) resolving any o/s patent litigation. CB w/be the only debt so we will assume L+300 for 5y. ADV=1.4m, 01/17 same strike calls=37iv bid, 1y 100/200d=53/44, we’d assume 37% for 5y. Theo=98.8/100.7/ 102.6. Classic cap structure play 4 h/f (over bght eqty vs solid b/sheet) & an eqty growth story/poss m&a play 4 l/only (superior next/gen tech). Model already stretched o/wise a SECURE play.


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