Just one day after Samsung Electronics CO Ltd’s $5.9 billion takeover offer was rejected by SanDisk Corp. on the grounds that it was considered "inadequate," the flash memory card maker’s shares went up about 45 percent, reaching $21.60.
Samsung was very interested in acquiring the company, as at this point it pays SanDisk an annual fee for royalties of about $350 million. The tax is used in order to gain access to its flash memory technology.
Eli Harari, chairman and CEO of SanDisk wanted to make it clear that any sort of negotiation will be carried out from now on on the company’s own terms and that he fully acknowledges the real value of his company. He called the offer an opportunistic attempt to take advantage of the company’s current low stock price. He said, “We believe Samsung’s proposal does not provide appropriate value to our stockholders and is opportunistically timed at the trough of an industry-wide downturn. We believe we have the strategy, execution record, innovation and financial resources to return to profitable growth and be the flash memory leader in new growth markets in mobile devices, solid state disk, and portable consumer electronics.”
With this move, Samsung was looking to gain access to an advanced technology platform which would have helped in its efforts to become the dominant market player. Also, it would have helped the company slash its costs and the use of SanDisk’s many licenses would have facilitated an easier work process.
The bid was described by Samsung’s officials as full and fair, while pretending not to understand the issues raised by SanDisk. They also addressed the rejection, saying that they are deeply disappointed and that SanDisk’s expectations on its market value and also on its appropriate acquisition price are unrealistic. Its statement was based on the fact that the offer represented a 73 percent premium over SanDisk’s Tuesday closing stock price, which was listed at $15.04.
Even though the two companies have been talking about this deal since May, it appears that finding a solution that would be considered a win-win situation is extremely difficult and a fix at this point is very unlikely to happen. The two will probably continue with their initial partnership and at the same time, maybe, look for other potential business partners.
Samsung was ranked No. 1 in the global NAND flash market in the second quarter with a 42.3 percent share, according to market research firm iSuppli, and was followed by Toshiba with 27.5 percent and Hynix with 13.4 percent.
So far, the decision seems to be the right one, with its stock value rising and its name on the newspapers’ front pages. The tricky part comes with its next move, which should back up everything said so far.
SanDisk is known for making flash-memory products which are used by a large variety of consumer electronics devices, such as MP3 players, digital cameras, cell phones and many other similar products. Samsung, on the other hand, is one of the world's largest manufacturers of flash memory chips.
