SanDisk Spurns Samsung's $5.8B Offer

Flash vendor SanDisk has rejected Samsung's "opportunistic" attempt to acquire the company for $5.8 billion, accusing the electronics giant of exploiting current market conditions.

"It is an opportunistic attempt to take advantage of SanDisk's current stock price, which is significantly depressed," wrote the SanDisk board of directors, in a letter published last night. The proposal "significantly undervalues SanDisk given the longer-term prospects of our business and does not reflect the substantial synergies Samsung can obtain from the proposed acquisition."

Media reports earlier this month suggested that SanDisk was a target for Samsung. But SanDisk's board clearly feels that the Korean electronics giant's $26 per share offer is much too low.

SanDisk's letter explained that Samsung first approached the company on May 22, indicating that they could be willing to pay a premium to the firms $28.75 closing price on that day. SanDisk's shares were trading at $21.12 this afternoon, $6.11 (40.62 percent) higher than today's opening price.

"We believe Samsung's proposal does not provide appropriate value to our stockholders and is opportunistically timed at the trough of our industry-wide downturn," said Eli Harari, the SanDisk CEO, in a statement. "We believe we have the strategy, execution record, innovation, and financial resources to return to profitable growth."Samsung's board of directors responded with their own strongly worded letter today.

"[We] are deeply disappointed that after four months of discussions and meetings – in Seoul and San Francisco – about a possible business combination, SanDisk continues to cling to unrealistic expectations on both its standalone market value and an appropriate merger price," it said. "We remain prepared to acquire all of the outstanding shares of SanDisk for $26 per share in cash."

The Samsung directors described the offer as "full and fair," adding that this represents an 80 percent premium on the firm's closing share price on Sept. 15.

"The world has changed dramatically in the past 52 weeks, as can be seen from SanDisk's own disappointing results," added the directors, clearly only too happy to take a swipe at their acquisition target. "Our offer insulates your shareholders from the risk of market conditions that have severely deteriorated and are expected to remain challenging."

At least one analyst thinks that Samsung is likely to continue its pursuit of SanDisk."This is a great time to acquire any U.S. company," wrote Jim Handy of Objective Analysis, in a note released earlier today. "The dollar is trading low against most foreign currencies, so U.S. acquisition targets are a real bargain."

The analyst adds that the current standoff between the two firms could work in Samsung's favor if it continues for any length of time.

"Should this scenario drag on for several months, Samsung will be able to prove to shareholders that SanDisk's stock price cannot be expected to improve for the next few quarters," he writes. "We see this as a very shrewd move by Samsung to take advantage of a confluence of favorable circumstances - their timing is excellent."

SanDisk certainly makes an attractive acquisition target for Samsung, enabling the vendor to offer both Flash chips and memory cards, and compete more effectively with its rival Seagate.

SanDisk, which is the world's largest provider of Flash memory cards for both consumer and business users, has already forged partnerships with the likes of IBM to provide blade-based storage. The Milpitas, Calif.-based vendor also added online backup to its USB offerings earlier this year.It was rumored earlier in the year that Seagate was planning to buy parts of SanDisk, which took a revenue hit in its recent second quarter results.

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