Samsung withdraws SanDisk takeover bid


— 9:38 AM on October 22, 2008

The flash memory market may not see additional consolidation after all. We noted in early September that Samsung was pursuing a buyout of SanDisk. The latter subsequently asked for more money, which led Samsung to initiate a hostile takeover.

Today, Reuters reports that Samsung has pulled out of the potential $5.9 billion deal. What's changed? Samsung CEO Lee Yoon-woo wrote to SanDisk saying, "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."

Indeed, SanDisk sold 30% of its manufacturing capacity to Toshiba for a cool $1 billion earlier this week, and its latest quarterly results don't look too inspiring. However, Reuters quotes a couple of analysts who believe Samsung may not have given up yet. Jim Handy from Objective Analysis says, "Today's announcement should help Samsung push SanDisk's share price lower, making it possible to acquire the company at a better deal." Meanwhile, Song Myung-sup of HI Investment & Securities thinks the wording of Samsung's letter leaves room for another deal.

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