Eden Prairie, Minn. – MTS Systems Corporation (NASDAQ: MTSC), a leading global supplier of high-performance test systems and position sensors, announced the commencement of registered underwritten public offerings of the Company’s Common Stock and tangible equity units. The proposed offerings consist of 1,500,000 shares of Common Stock and 1,000,000 tangible equity units, each tangible equity unit with a stated amount of $100. The completion of the Common Stock offering is not contingent on the completion of the tangible equity units offering, and the completion of the tangible equity units offering is not contingent on the completion of the Common Stock offering, and neither offering is contingent on the completion of the PCB Group, Inc. (“PCB”) acquisition.

Each tangible equity unit will consist of a prepaid stock purchase contract and an amortizing note. Unless earlier settled or redeemed, each stock purchase contract will automatically settle on July 1, 2019 for shares of Common Stock (subject to postponement in limited circumstances). The amortizing notes will pay equal quarterly installments that will constitute a payment of interest and a partial repayment of principal. The amortizing notes will have a final installment payment date of July 1, 2019 and will be unsecured senior obligations of the Company.

In connection with the pricing of the tangible equity units, the Company expects to enter into capped call transactions with an affiliate of J.P. Morgan Securities LLC and an affiliate of Wells Fargo Securities, LLC (the “option counterparties”). The capped call transactions are expected to reduce potential dilution to the Company’s Common Stock upon any settlement of the purchase contracts, with such reduction subject to a cap.

In connection with establishing their initial hedge positions with respect to the capped call transactions, we expect that the option counterparties (and/or their respective affiliates) will enter into various derivative transactions with respect to the Company’s Common Stock concurrently with or shortly after the pricing of the tangible equity units and the option counterparties (and/or their respective affiliates) may unwind these various derivative transactions and purchase shares of the Company’s Common Stock in open market transactions shortly following the pricing of the tangible equity units. These activities could have the effect of increasing, or reducing the size of a decline in, the market price of the Company’s Common Stock or the trading price of the purchase contracts or tangible equity units concurrently with, or shortly following, the pricing of the tangible equity units.

The Company intends to use a portion of the net proceeds of the tangible equity units to fund the cost of the capped call transactions and the remaining net proceeds of the offerings to partially fund the acquisition of PCB. If the acquisition of PCB is not completed, the Company intends to use the net proceeds from these offerings for general corporate purposes, including strategic investments and acquisitions. If the tangible equity units offering is completed but the acquisition of PCB is not consummated, the Company may redeem all, but not less than all, of the outstanding purchase contracts by issuing a redemption notice. The Company will pay a redemption price at that time in cash or in shares of Common Stock in accordance with the terms of the purchase contracts. If the Company elects to redeem the purchase contracts, it may be required by the holders thereof to repurchase the amortizing notes at the repurchase price set forth in the amortizing notes.