Toshiba's SanDisk deal forces Samsung to abandon $5.85-billion bid

SanDisk's $1-billion deal with Toshiba has had the expected effect - Samsung has withdrawn its hostile $5.85-billion bid to acquire the US memeory products maker. While SanDisk is the world's largest maker of memory cards used in cameras, Toshiba is No.2 in flash memory behind its Korean rival Samsung. (See: SanDisk fends off Samsung advances with $1 billion Toshiba deal)

South Korea-based Samsung said it no longer believed Milpitas-based SanDisk was worth the $26 a share it offered last month. The offer was rejected by the SanDisk board, which said it was simply an effort to buy it cheap when the market was down. But Samsung, which pulled out after six months of what it called "no meaningful progress," hinted it might still be interested in a lower purchase price.

Samsung walked away from what would have been the company's biggest acquisition and the chance to widen Samsung's lead over Toshiba Corp in the $15-billion market for memory chips that store songs and pictures in electronics. The move may increase pressure for SanDisk CEO Eli Harari to boost shareholder returns after the stock fell 56 per cent this year.

"Your surprise announcements of a quarter-billion-dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organisation 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," Samsung CEO Lee Yoon-woo wrote to SanDisk.

''We squarely face the growing uncertainties in your business, which may continue to deteriorate in this difficult economic environment and further impact your standalone value,'' Lee, who became Samsung's chief in May, said in an open letter to Harari. SanDisk's results, where it declared a $155 million loss on Monday, ''serve only to illustrate this risk.''

The American company's response was no less combative. The withdrawal ''raises questions about the real motivations behind Samsung's offer,'' SanDisk said in a statement, adding that Samsung ignored its ''clear path to hold further discussions.''

Samsung publicly disclosed its offer last month after receiving a 15 September rejection letter from SanDisk's Harari. Samsung initially indicated it would be willing to pay a ''significant'' premium to the $28.75 per share price on 22 May, when it first approached the US company, SanDisk had then said. (See: SanDisk rejects Samsung's $5.85-billion bid)

Samsung has a 42.3 per cent share of the NAND flash memory- chip market in the second quarter, compared with Tokyo-based Toshiba's 27.5 per cent and Hynix Semiconductor Inc.'s 13.4 per cent.