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The world’s largest memory manufacturer Samsung Electronics on Tuesday proposed to acquire SanDisk Corp. for $5.85 billion, offering a huge premium over the current stock price of the flash memory maker. However, SanDisk said that it was not interested in the deal.

“We remain prepared to acquire all of the outstanding shares of SanDisk for $26 per share in cash. […] 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 93% over SanDisk’s closing share price on September 4, 2008, the day before news reports indicated that we were in discussions about a business combination,” a statement by Samsung Electronics reads.

The transaction would cost Samsung $5.85 billion, which is actually a premium of 80% over SanDisk’s closing share price on September 15, 2008, and a 66% and 164% premium to the company’s 30-day weighted average price and enterprise value as of September 4, 2008, respectively.

However, SanDisk reportedly referred to 52-week high – which was about $55 per share – in order to convince Samsung to pay considerably more than it agreed to. The South Korea-based Samsung insists that overall condition of the world’s economy got much worse than they were and SanDisk’s business and value changed drastically.

“The world has changed dramatically in the past 52 weeks as can be seen from SanDisk’s own disappointing results. Consumer spending and the overall economic situation have been getting worse. It will take the NAND flash market quite a bit of time to recover. Notwithstanding the current market conditions, to stay competitive, SanDisk will need to fund critical investment and development over the next several months – cost cutting alone will not suffice,” the statement by Samsung claims.

Nevertheless, in its final letter to the world’s largest maker of memory SanDisk said that it still considers Samsung’s proposal undervalued.

“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. In our view, this proposal fails to recognize the value of our patent portfolio, in particular to Samsung, our significant investments in our strategic partnerships, and our technology leadership in 3 and 4 bits per cell flash memory, advanced controllers and three dimensional (3D) semiconductor memory. 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,” said Eli Harari, chairman of the board and chief executive officer of SanDisk.

The combination of Samsung Electronics and SanDisk would create a major force on the market of NAND flash and would allow Samsung to boost its market share that is already about one third of the market.

Tags: SanDisk, Samsung, Flash, Business


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