Shares of SanDisk Corp., the world's largest supplier of flash storage card products, skyrocketed Wednesday after it was confirmed that Samsung Electronics Co. Ltd. is trying to acquire the firm. SanDisk rejected Samsung's $26 per share, or $5.85 billion, offer, which -- depending on how you look at it -- is an 80% premium over SanDisk's closing share price on Sept. 15 or a 55% discount to SanDisk's 52-week high of $56.
SanDisk called the offer "opportunistic."
That may very well be true ... in a year's time. Tech Confidential quoted analyst Jim Handy as saying that Samsung was swooping in on SanDisk during a cyclical downturn in the memory chip industry and that
Samsung's timing was "excellent." While he said he believes that SanDisk's share value will return to well-above Samsung's $26 per share offer, it will not happen until next year. Samsung vice chairman and CEO
Yoon-Woo Lee wrote, "Our offer insulates your shareholders from the risk of market conditions that have severely deteriorated and are expected to remain challenging."
There are a number of pros and cons as to why the deal will and won't work. Samsung already pays several hundred million dollars a year to use SanDisk patents. And with Samsung's scale and SanDisk's technology, the two would be able to accelerate the adoption of
flash memory technology in new markets.
Although, a deal creating such dominance could raise antitrust concerns, Samsung says it won't cut any jobs from SanDisk, but as a dealReporter article noted, there are also cultural issues at hand as South Korea's
Samsung could lose key engineers in an acquisition of Milpitas, Calif.'s SanDisk. Some U.S. workers may not want to work for a South Korean company.
One banker in the article, who deals with both companies, said for Samsung to complete it first U.S. acquisition, it would have to be very compelling, and the SanDisk deal does not qualify as compelling -- Samsung historically looked at smaller deals and venture investments. Also, an executive said its unlikely SanDisk's founder, chairman and CEO Eli Harari (pictured) is willing to give up the firm's independence.
SanDisk shareholders will have to have faith in the company to uphold the rejection. Shares traded up around 40% midday Wednesday to $21.11. -
Baz HiralalGo to the Tech Confidential postSee Samsung's letter to SanDiskSee SanDisk's responseFlash memory: Industry insights and a surge of partnerships
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