SanDisk is on the skids along with the majority of the flash memory makers as the weak global economy and over supply of product on the market are driving the price of flash products down. While lower prices are good for consumers, some major flash product makers maintain selling prices are often lower than the products cost to make.
SanDisk's stock price was down when Samsung first approached it with an unsolicited purchase offer. At the time the original overture from Samsung began, the firm was offering SanDisk $26 per share. SanDisk's board unanimously turned the offer down stating that the offer failed to properly value SanDisk.
At the time of the initial offer, $26 per share was a 93% premium over SanDisk's closing price on September 4, but represented a 55% discount when compared to SanDisk 52-week high stock price. Samsung said that the flash maker was clinging to unrealistic expectations.
Since the initial offer and the expected negotiations began, SanDisk's stock price and valuation have continued to drop. Samsung has issued a statement saying that it was no longer interested in purchasing SanDisk at a price of $26 per share.
Samsung CEO Yoon Woo Lee wrote in the statement, "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."
SanDisk responded to Samsung's statement with one of its own stating in part, "From the start of this process SanDisk’s Board has remained open to a transaction that recognizes SanDisk’s long-term value and contains the right protections for SanDisk's shareholders. We repeatedly outlined a clear path to hold further discussions, including most recently in our letter on September 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."
Some analysts believe that Samsung's statement will help to push SanDisk's stock prices even lower and could help Samsung acquire the flash maker at a reduced price. SanDisk's stock price closed at $14.76 on Tuesday and has dropped over 55% this year.
Boston.com quotes analyst Kim Young-june from KTB Investment saying, "Samsung probably has decided that as the memory chip market continues to weaken, the kind of price SanDisk was asking wasn't what they were willing to go along with. The fact that the macroeconomic environment continues to worsen and that the South Korean government has warned against big overseas M&A deals also probably weighed."
It doesn't take an investment firm analyst to read between the lines in both statements and realize that neither company says that all negotiations are off. Samsung is hoping that SanDisk will see the light and under the pressure of further declining stock prices be more open to takeover at a lower price. At the same time, SanDisk is likely hoping that Samsung will fear SanDisk's closer ties to Toshiba and pay more to keep its rival from acquiring what it covets.