labels: M&A, IT news, Samsung
SanDisk fends off Samsung advances with $1 billion Toshiba deal news
20 October 2008

In a $1 billion deal, flash-memory maker SanDisk Corp. said today it's agreed to sell Toshiba Corp 30 per cent of the manufacturing capacity the two companies own in joint ventures. While SanDisk is the world's largest maker of memory cards used in cameras, Toshiba is No.2 in flash memory behind Korean rival Samsung.

Interestingly, it has been only a month that Milpitas, California-based SanDisk rejected a $5.85 billion buyout offer from Samsung, citing the offer of $26 a share as too low. (See: SanDisk rejects Samsung's $5.85-billion bid)

Under a nonbinding agreement with Japan's Toshiba, SanDisk would sell part of its capacity in their 50-50 flash joint ventures in exchange for cash and reduced leasing costs that would total about $1 billion.

The companies, which jointly own two factories in Yokkaichi, western Japan, will split the remaining 70 per cent of the output equally, Toshiba said in a statement released today. Keisuke Ohmori, a spokesman at Tokyo-based Toshiba, said SanDisk proposed the sale, while declining to give financial details.

SanDisk expects to receive cash and cut equipment-leasing obligations by about $1 billion should the transaction with Toshiba be completed, probably in the quarter ending 31 March 2009, it said in a separate release. Toshiba said a purchase might help it expand flash- memory output at a lower cost than through buying new equipment.

The move gives Toshiba 65 per cent of the production capacity at the existing lines at the two firms' joint factories, with SanDisk holding 35 per cent. SanDisk would retain the option to buy some of the chips made by the equipment it sells to Toshiba, and said it planned to continue investing its half share in future.

Some analysts had suggested Toshiba might bid for all of SanDisk given their close ties. The two companies operate three joint ventures and will also continue to jointly invest in the next generation of flash-memory products. Increasingly popular, flash memory is used in a variety of consumer devices such as wireless phones, MP3 players, mini-computer drives and digital cameras.

In pre-market trading, shares of SanDisk rose slightly to $15.65 from Friday's closing price of $15.51. The stock has fallen sharply over the past year owing to the global financial crisis and to a glut in the flash memory market that has sharp reduced SanDisk's profits. Less than one year ago, SanDisk traded above $50 a share.

Toshiba is also suffering amid the worldwide crash in memory prices. It is expected to post a quarterly operating loss of 30 billion yen, its first operating loss for the April-September period in five years.

Toshiba, which plans to build two new plants in 2010, said it was still calculating how and if the move would affect its capital spending plans.


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SanDisk fends off Samsung advances with $1 billion Toshiba deal