Samsung Makes $6B Offer for SanDisk

Samsung Electronics Co, the world’s top maker of memory chips, on Tuesday made public a nearly $6 billion proposal to acquire SanDisk Corp after months of private negotiations failed to result in a deal.

SanDisk has privately told Samsung the $26-a-share offer undervalues the company, especially since Samsung had indicated in May it would be willing to pay upward of $28.75 per share, a source familiar with the company told Reuters.

There were rumors of such an acquisition earlier this month, with the target price set at $3.2 billion.

Earlier on Tuesday, Toshiba Corp said it was open to a combination with SanDisk, but that it was not in concrete talks yet.

SanDisk shares rose 53 percent to $23 in extended trade.

In a letter addressed to SanDisk Chief Executive Eli Harari and Vice Chairman Irwin Federman, Samsung Chief Executive Yoon-Woo Lee said he was “deeply disappointed” that the Milpitas, Calif.-based company “continues to cling to unrealistic expectations on both its stand-alone market value and an appropriate merger price.”

Lee said the $26 per share price is an 80 percent premium over SanDisk’s Monday closing share price.

Samsung is offering $5.8 billion for SanDisk, calculated on the basis of about 225 million shares outstanding.

Samsung said last week it may buy SanDisk, as it tries to expand market share at a time when flash memory prices are falling sharply. The deal also would reduce licensing costs for Samsung by assuming control of SanDisk’s popular technology

“The world has changed dramatically in the past 52 weeks as can be seen from SanDisk’s own disappointing results,” Lee wrote.

He said a combination of the two companies would create a superior global brand, which could speed up the adoption of flash memory technology in new markets.

Flash memory is used in digital cameras, cellphones and music players, among other products.