Who's Your Mergers & Acquisitions Consultant, SanDisk? Jerry Yang?
Is SanDisk out of its mind?
On Tuesday the company rejected a $5.9 billion acquisition bid by Samsung Electronics. Apparently, it feels the $26-a-share cash offer–an 80 percent premium over its Monday close–undervalues the company. Which may have been true once upon a time. But now that a supply glut has depressed prices for the memory cards on which its business is built and its shares have lost half their value, well … really, you have to wonder what the company is thinking.
Anyway, Samsung isn’t taking no for answer. In a letter to SanDisk CEO Eli Harari Wednesday, Samsung CEO Yoon-Woo Lee argued that a merger is a financial win for both companies.
Our many meetings and conversations over the last several months have served to confirm for us 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. With SanDisk’s innovative culture and technology leadership and Samsung’s scale, leadership in manufacturing and execution, and strong systems and consumer electronics segment knowledge, the combined company would be well positioned to accelerate the adoption of flash memory technology in new markets. We can also establish the platforms and capabilities necessary to position flash as the preferred vehicle for delivery and storage of a wide variety of content, such as film, in a way that would not be possible for either of our companies alone.
As we have seen in recent months, markets have become more turbulent and global economic trends are negative. At the same time the competitive environment remains challenging. To survive and compete in these times we will each need to leverage our resources and rely upon a strong balance sheet to fund critical investment and development through good times and bad. Separately investing in necessary state of the art facilities will be a significant tax on your 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.
A persuasive argument. But not in the eyes of SanDisk (SNDK), which seems determined to play Yahoo (YHOO) to Samsung’s Microsoft (MSFT) and, in Lee’s words, “continues to cling to unrealistic expectations on both its standalone market value and an appropriate merger price.”