SanDisk rejects $6 billion offer from Samsung

By Rhee So-eui and Anupreeta Das

SEOUL/SAN FRANCISCO (Reuters) - U.S. flash memory card maker SanDisk Corp (SNDK.O) rejected a $5.9 billion bid by top memory chip maker, Samsung Electronics Co Ltd (005930.KS), but would not rule out a deal at a better price.

Buying SanDisk would give Samsung advanced technology and a tighter grip on its market dominance as smaller rival Toshiba Corp (6502.T) is challenging its position and the industry battles steep memory price falls because of capacity overbuilding.

Samsung, which pays SanDisk over $350 million a year in royalties to use patented flash technology, is looking not only to slash those costs and but also gain control of SanDisk's many licenses that control the industry.

"With the offer, Samsung is eyeing an industry shakeup in the 4-5 year horizon. Samsung and SanDisk can work on technology and marketing together," said Park Hyun, an analyst at Prudential Investment & Securities.

SanDisk said in a statement that Samsung's $26-a-share cash offer -- an 80 percent premium to its Monday close -- undervalued the company, but it remained open to a deal with Samsung at a price that recognizes its "intrinsic value".

SanDisk shares soared 53 percent to $23 in extended trading on Tuesday U.S. time after Samsung went public with its bid following months of private talks that failed to produce a deal.

Samsung, South Korea's biggest stock, ended flat at 525,000 won on Wednesday, lagging the wider Seoul market's 2.7 percent gain.

When asked about whether Samsung could raise its bid, James Chung, a company spokesman in Seoul, said: "It is premature to comment on the matter." He called the bid "full and fair".

A deal around that level would be the biggest takeover by cash-rich Samsung, which has grown its business without resorting to big M&A deals. It will be also an unprecedented deal in the NAND industry which has seen many alliances but not a full acquisition of this scale.

SanDisk is the world's biggest maker of flash memory based-data storage cards. Analysts estimate SanDisk's flash card products consume up to 15 percent of the global NAND chip output, a large portion of them coming from SanDisk's joint plant with Toshiba in Japan.

Flash memory is a form of compact data storage, also used in a number of consumer gadgets, including digital cameras, cellphones and portable music players.

Samsung would also be able to secure SanDisk's advances in solid state drive (SSD), the flash-based technology that is likely to power most personal computer memory in a few years.

On Tuesday, Toshiba said it was open to a combination with SanDisk, but there were no concrete talks yet.

Toshiba, the world's No.2 NAND flash maker, and third-ranked Hynix Semiconductor Inc (000660.KS) both declined to comment on Wednesday on Samsung's offer.

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