SanDisk?s founder and chief executive, Eli Harari, rejected the proposal in a letter made public Tuesday, saying that Samsung was significantly undervaluing the 20-year-old company. "We believe Samsung?s proposal does not provide appropriate value to our stockholders and is opportunistically timed at the trough of an industrywide downturn," Mr. Harari wrote.
SanDisk holds the intellectual property related to flash memory. Samsung pays SanDisk $440 million a year to license those patents.
However, Samsung today (Sep. 17) has sent a new letter to the Board of Directors of SanDisk reiterating its proposal to acquire SanDisk for $26 per share in cash.
"Under our proposal, which we are reiterating here, we remain prepared to acquire all of the outstanding shares of SanDisk for $26 per share in cash" read the Letter, signed by Yoon-Woo Lee, Vice Chairman and Chief Executive Officer Samsung Electronics Co., Ltd..
"As you know, our proposal is not subject to any financing contingency and the entire purchase price will be funded with our cash on hand and available financing. 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. Furthermore, it is a premium of 80% over your closing share price on September 15, 2008, and a 66% and 164% premium to your 30-day weighted average price and enterprise value as of September 4, 2008, respectively."
Samsung also said that given the overall economic situation, it would 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. Our offer insulates your shareholders from the risk of market conditions that have severely deteriorated and are expected to remain challenging. As highlighted above, we strongly believe that there is significant execution risk of achieving any stand-alone plan."
In an effort to furhter convince Sandisk's takeover, Samsung added that a combined Samsung-SanDisk would have "a superior global brand, an unparalleled technology platform and the scale and resources to drive convergence in the marketplace."
The S. Korean company also underlined that Sandisk would soon have to invest in necessary state of the art facilities, a move that would be a significant tax on Sandisk's business in the near term. "In addition, reliance on IP and enforcing it is a costly and uncertain business for both our companies. Faced with these challenges, now is the time to merge," Samsung said.
The letter concludes: "We are urging Sandisk to engage promptly in a productive discussion about Samsung's proposal."
Toshiba also interested
The head of Toshiba's semiconductor business said the flash memory maker was interested in a bid for partner SanDisk to prevent a takeover by rival Samsung.
"We need to take preventive steps, if (SanDisk) looks like it'll be acquired," Corporate Senior Vice President Shozo Saito told reporters on the sidelines of the Industry Strategy and Technology Forum on Tuesday, according to Reuters.
When asked about the possibility of a bid, he said Toshiba "was interested" but added that it was not in concrete talks.
Toshiba is the world's secong maker of flash memory, behind Samsung.