Samsung likely to overcome hurdles to SanDisk buyout

jueves 18 de septiembre de 2008 12:31 CEST

By Marie-France Han and Rhee So-eui

SEOUL, Sept 18 (Reuters) - Samsung Electronics (005930.KS: Cotización) $5.9 billion offer for SanDisk Corp SNDK.O faces major hurdles, but a savage industry downturn should persuade the U.S. flash memory card maker's biggest shareholders to pressure the board into accepting the deal.

South Korea's Samsung, the world's biggest maker of memory chips, has offered to buy SanDisk for $26 a share in cash -- around an 80 percent premium. SanDisk, which makes NAND flash memory cards and drives for devices such as mobile phones and cameras, has rejected the bid as undervaluing the company. [ID:nN16292606]

But analysts say the California-based company can ill afford to snub a deal at a time of oversupply in the NAND flash industry and when worsening consumer confidence threatens sales of gadgets that use the chips.

"This is a buyer's market," said Peter Yu, an analyst at BNP Paribas. "Samsung has good timing, cash, balance sheet and a lot of leverage on its side."

Samsung, which has until now shied away from big acquisitions in favour of growing its own sales, needs to persuade some of SanDisk's top institutional investors of the powerful logic behind the deal. In turn they can pressure SanDisk's board to accept it.

SanDisk's ownership is dominated by institutional investors, led by Fidelity, which owns a 12 percent stake. SanDisk CEO Eli Harari only owns 1.4 percent of the company.

"Just securing 20 or 30 percent of SanDisk could give Samsung management control," said Hyundai Securities analyst Jay Kim.

Kim added that SanDisk shareholders may be reluctant to wait for a recovery in its share price, which slumped to a record low in June, from a peak near $80 a share in early 2006.   Continuación...