Samsung, which pays up to $500m in royalties to SanDisk annually for its flash-memory patents, made an offer of $26 a share, a nearly 100% premium on SanDisk’s share price before the offer.
The SanDisk board unanimously rejected the unsolicited proposal saying it undervalued the long-term prospects of its business, failed to provide deal certainty, and did not reflect the synergies Samsung could attain from the takeover. The company also said that when Samsung originally approached it in May, it was willing to pay a significant premium on the then share price of $28.75.
The companies supplied nearly 50% of the world’s NAND flash memory chips last year so any acquisition would attract antitrust scrutiny. In addition, major buyers of flash memory could find their price negotiating power constrained and any increase in flash memory prices post-merger could severely affect the electronics market.
SanDisk’s current partnership with Toshiba could also be an impediment as rivals Toshiba and Samsung may not collaborate after a merger.
Eli Harari, chief executive at SanDisk, 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 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.
