September 16, 2008, 7:58 PM — SanDisk has rejected an unsolicited takeover bid from hardware maker Samsung Electronics, saying that it undervalues the Milpitas, California, maker of flash storage cards.
The two companies had been in takeover talks for about four months, but Samsung went public with its offer Tuesday, apparently after discussions had broken down.
"Our offer insulates your shareholders from the risk of market conditions that have severely deteriorated and are expected to remain challenging," Samsung Vice Chairman and CEO Yoon-Woo Lee wrote in a letter to SanDisk executives that Samsung released Tuesday.
SanDisk Chairman and CEO Eli Harari responded quickly, saying in a statement his company is willing to discuss a takeover, but that the US$26 per share offer "is opportunistically timed at the trough of an industry-wide downturn" and undervalues the flash card maker.
SanDisk's stock (SNDK), which had been trading in the $30 dollar range just four months ago, has dropped in recent months as a result of a global glut of flash memory chips. The stock closed Monday at $15.03, but was up more than 50 percent in after-hours trading after news of Samsung's offer broke.
SanDisk also suggested that the offer may be a "calculated negotiating ploy" aimed at gaining the upper hand in an ongoing patent-licensing dispute between the two companies.
The company's board of directors sent a letter to Samsung Monday stating that it had unanimously rejected the deal.
Samsung argues that a combination of the companies would create a powerful global brand and allow the resulting company to position Flash as the preferred technology for delivery and storage of content.
While Samsung said that SanDisk is a technology leader and has an innovative culture, it also argued that independently investing in the necessary facilities required to further technology innovation would be a significant tax on SanDisk's business.
Should the deal go through, Samsung would continue to operate SanDisk as a separate subsidiary and would not plan to lay off workers, it said.