A Better Trade not realized: Samsung bids for SanDisk
In an effort to reduce its flash memory costs, international electronics giant
Samsung made a proposal in the September 2008 to purchase computer chip maker
SanDisk. This would have been a better trade for Samsung, which now pays
SanDisk more than $400 million each year in licensing fees. SanDisk rebuffed
the offer of $5.8 billion in cash that emerged after three months of
negotiations. Samsung officially withdrew the offer in October 2008.
Such a better trade would have allowed Samsung to widen the gap between itself
and its No. 1 competitor, Toshiba, in the $15 billion market for chips that
store data in cameras and portable music players. SanDisk is a major player in
the market for NAND flash memory, which is found in many digital devices,
including cameras and music players. The trade would also have allowed Samsung
to gain control of the intellectual property.
In September 2008, Samsung sent a letter to the board of directors at SanDisk,
citing its disappointment in the inability make a better trade. Samsung said
that SanDisk, "continues to cling to unrealistic expectations on both its
standalone market value and an appropriate merger price." Samsung had made an
offer to acquire all outstanding shares of SanDisk for $26 per share in cash.
The purchase was going to be funded with cash that Samsung had on hand and
was not subject to any financing contingency.
SanDisk didn't view this as a better trade because it was not beneficial to
its shareholders. The SanDisk price was at a low point, which meant Samsung
would be buying at a bargain rate. SanDisk held about 40 percent of the flash
card business, which guaranteed some profitability.
There were some in the SanDisk camp who felt Samsung's offer was a negotiating
ploy to gain leverage in future licensing negotiations. The two companies had
met at least 10 times to discuss the issue prior to the buyout offer. It would
have been the largest foreign acquisition by a South Korea-based company.
Samsung is a global leader in semiconductors, telecommunications, digital
media and digital convergence technologies. Samsung employs more than 150,000
people in 134 offices in 64 countries with sales of more than $103.4 billion.
In 2005, Samsung surpassed rival Sony for the first time to become the most
popular electronics brand in the world. In 2007, Samsung overtook Motorola to
become the second-largest maker of mobile phones. Samsung joined German
company Siemens and U.S.-based Hewlett-Packard as one of the top three
electronics companies in the world.
SanDisk is an American multinational corporation that designs and markets
flash memory cards. It was founded in 1988 and went public in 1995. In 2008
its market capitalization was $6.5 billion, as the company has been successful
marketing to both the high-end and low-end sector of the market. The company
is based in Milipitas, California, with offices or manufacturing facilities
in 10 locations in Asia, six in Europe and three in Israel.
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