Samsung bid for SanDisk turns nasty

17 Sep 2008

Korean electronics giant Samsung has mounted a hostile US$5.9bn takeover bid for Californian consumer electronics storage firm SanDisk, after the company rejected its initial offer.

Shares in SanDisk surged to US$23.95 after news of the rejection hit markets.

Samsung is understood to have offered US$26 in cash for each SanDisk share.

Getting its hands on SanDisk would give Samsung an unparalleled advantage in the NAND memory card market, which is essential for devices like digital cameras and mobile phones and, lately, laptop computers.

Samsung already has a 42.3pc share of the booming NAND market.

Analysts have said such aggressive pursuits are uncharacteristic for Samsung, which apppointed a new CEO in May, Lee Yoon Woo.

The market believes it’s unlikely that another possible bidder – Toshiba – will match the US$26-a-share offer.

SanDisk’s board are understood to have unanimously rejected Samsung’s cash offer as too low.

But Samsung is having none of it and intends to continue to pursue a deal.

The company already pays SanDisk up to US$350m a year in royalty payments for access to NAND patents.

But SanDisk is potentially easy prey considering poor financial results pushed its share price from a 52-week high of US$60 to US$15 in recent weeks.

After yesterday’s rejection by SanDisk’s board, Samsung has decided to outflank the executives and go directly to the company’s shareholders.

In a letter to Eli Harari, chairman and CEO, and Irwin Federman, vice chairman of SanDisk, Samsung’s CEO Yoon-Woo Lee wrote: “This offer is full and fair and we believe that, given an opportunity, your shareholders would agree.

“It constitutes a very substantial premium to SanDisk’s share price and would deliver to your shareholders an immediate cash premium of 93pc over SanDisk’s closing share price on 4September, 2008, the day before news reports indicated that we were in discussions about a business combination.

“Furthermore, it is a premium of 80pc over your closing share price on 15 September, 2008, and a 66pc and 164pc  premium to your 30-day weighted average price and enterprise value as of 4 September, 2008, respectively,” Lee wrote.

By John Kennedy

Pictured: the SanDisk Gaming SD™ memory card family

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years