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Samsung retreats from buying SanDisk

Posted: 24 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:memory? storage?

Samsung Electronics Co. Ltd will no longer pursue its proposal to acquire SanDisk Corp. for $26 per share in cash as part of the company's major change in strategy.

Earlier reports claimed Samsung went public with a proposal to buy flash memory maker SanDisk for $26 per share. An offer of $26 per share, according to SanDisk's outstanding total share of nearly 225 million, would be worth more than $5.8 billion.

SanDisk rejected the bid. But now, Samsung has backed away from the deal amid losses at SanDisk. SanDisk also renewed a deal with NAND partner Toshiba Corp., giving Samsung little hope or no room to close a deal.

SanDisk entered into a non-binding memorandum of understanding with Toshiba to sell around 30 percent of the current NAND fab capacity of the parties' joint ventures to Toshiba.

With an objective to increase cash amid losses and a memory downturn, SanDisk anticipates to get cash and minimize equipment lease obligations by around $1 billion through this transaction. As part of the deal, Toshiba seeks to raise its NAND flash production.

SanDisk's earnings
Meanwhile, SanDisk said Q3 revenue was $821 million, a decline of 21 percent on a year-over-year basis. Net loss was $155 million or less $0.69 per diluted share, compared to generally accepted accounting principles net income of $85 million, or $0.36 per diluted share, in Q3 07.

''From the start of the process, SanDisk's board has remained open to a transaction that recognizes SanDisk's long-term value and contains the right protection for SanDisk's shareholders,'' according to a statement from SanDisk.

''We repeatedly outlined a clear path to hold further discussions, including most recently in our letter on Sept. 15, and Samsung consistently chose to ignore that path and, in fact, never contacted SanDisk regarding their proposal after we delivered our letter. We believe this raises questions about the real motivations behind Samsung's offer,'' said SanDisk.

The full text of Samsung's letter to SanDisk's board withdrawing its proposal follows:

October 22, 2008

Board of Directors

SanDisk Corporation

601 McCarthy Boulevard

Milpitas, CA 95035

Attention: Dr. Eli Harari, Chairman and Chief Executive Officer

Mr. Irwin Federman, Vice Chairman and Lead Independent Director

Dear Eli and Irwin:

After nearly six months of efforts to pursue a transaction with no meaningful progress, we are withdrawing our proposal to acquire SanDisk. I am disappointed that we have been unable to reach an agreement on our proposal. I continue to believe that a combination of our two companies would have created a superior global brand, an unparalleled technology platform and the scale and resources to drive convergence in the marketplace. Had we been able to execute on our proposal, your shareholders would have received full, fair and certain value for their shares and your employees and other stakeholders would have benefited from a broader platform and a wider range of opportunities.

Nevertheless, we have obligations to our own shareholders which require that we take a disciplined approach, particularly with respect to significant initiatives such as this. That disciplined approach requires that we squarely face the growing uncertainties in your business, which may continue to deteriorate in this difficult economic environment and further impact your standalone value. Your recently announced third quarter results serve only to illustrate this risk. Your surprise announcements of a quarter billion dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organization all point to a considerable increase in your risk profile and a material deterioration in value, both on a stand-alone basis as well as to Samsung. As a result of these developments, we are no longer interested in acquiring SanDisk at $26/share.

While I regret that we were unable to work together to achieve a business combination that would have created new opportunities for all of us, we wish you the best in meeting the challenges ahead.

Sincerely,

Yoon Woo Lee

Vice Chairman & CEO

Samsung Electronics Co. Ltd

- Mark LaPedus
EE Times





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