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Samsung Buying Sandisk?


1.They Weren’t Kidding: Samsung Bids $26/Shr For SanDisk /Tech trader daily /Blogs

2.SanDisk Board Rejects Samsung Offer As Too Low/Tech trader daily /Blogs

3. Samsung Still Has Leverage On SanDisk/

4. Toshiba mulls bid to buy SanDisk/ EETimes

5.SanDisk /Samsung merger put in doubt over financing, antitrust and partnerships issues /FTimes

6. Samsung Goes Hostile in Bid For Memory-Maker SanDisk/



1. They Weren’t Kidding: Samsung Bids $26/Shr For SanDisk

Posted by Eric Savitz September 16, 2008, 6:41 pm

Defying skeptics who had warned that a deal would face significant hurdles, Samsung this afternoon announced that it has offered to buy SanDisk for $26 a share in cash. While Samsung had previously said it might be interested in buying SanDisk, many on the Street were convinced that Samsung was more interested in improving its negotiating position on a renewed license agreement over NAND-related patents than actually buying the company. But today the skeptics on the potential for such a deal - and I count myself among them - have been proven incorrect.

This is clearly not a friendly deal. The Samsung announcement notes it is “reiterating” its proposal to acquire Samsung, and includes a length letter to SanDisk’s management that makes it clear that the two companies had been talking for months, but that SanDisk had wanted a higher price. The hostile nature of the offer makes the potential regulatory obstacles to the deal - the combination would own a majority of the global NAND flash production capacity - all the more daunting.

In the letter, Samsung rips SanDisk for continuing “to cling to unrealistic expectations on both its standalone market value and an appropriate merger price.” The company notes that the offer is a large premium to SanDisk’s recent stock price, and says the porposed deal would not require any financing, and would be financed by Samsung from cash on hand.

In after hours trading, SanDisk shares have jumped $8.16, o4 54.3%, to $23.20.

Here’s a copy of Samsung’s letter to SanDisk:

September 17, 2008

Board of Directors
SanDisk Corporation
601 McCarthy Boulevard
Milpitas, CA 95035


Dr. Eli Harari, Chairman and Chief Executive Officer
Mr. Irwin Federman, Vice Chairman and Lead Independent Director

Dear Eli and Irwin:

We are in receipt of your letter dated September 15, 2008 and are deeply disappointed that after four months of discussions and meetings – in Seoul and San Francisco – about a possible business combination, SanDisk Corporation (“SanDisk”) continues to cling to unrealistic expectations on both its standalone market value and an appropriate merger price. Under our proposal, which we are reiterating here, we remain prepared to acquire all of the outstanding shares of SanDisk for $26 per share in cash. As you know, our proposal is not subject to any financing contingency and the entire purchase price will be funded with our cash on hand and available financing.

This offer is full and fair and we believe that, given an opportunity, your shareholders would agree. It constitutes a very substantial premium to SanDisk’s share price and would deliver to your shareholders an immediate cash premium of 93% over SanDisk’s closing share price on September 4, 2008, the day before news reports indicated that we were in discussions about a business combination. Furthermore, it is a premium of 80% over your closing share price on September 15, 2008, and a 66% and 164% premium to your 30-day weighted average price and enterprise value as of September 4, 2008, respectively.

Despite the significant premium we propose to SanDisk’s current stock price, your letter states that our proposed price does not “reflect the intrinsic value of SanDisk’s business” and references the 52-week high. The world has changed dramatically in the past 52 weeks as can be seen from SanDisk’s own disappointing results. Consumer spending and the overall economic situation have been getting worse. It will take the NAND flash market quite a bit of time to recover. Notwithstanding the current market conditions, to stay competitive, SanDisk will need to fund critical investment and development over the next several months – cost cutting alone will not suffice. Our offer insulates your shareholders from the risk of market conditions that have severely deteriorated and are expected to remain challenging. As highlighted above, we strongly believe that there is significant execution risk of achieving any stand-alone plan.

While it has been and remains our strong preference to continue to work with you to reach a binding merger agreement in a cooperative and expeditious fashion, we have become increasingly concerned that the lack of progress is not serving the interests of either company’s shareholders. For this reason, and the fact that speculation has grown since the early September news reports, we feel compelled to clarify our intentions publicly.

Compelling Business Logic

Our many meetings and conversations over the last several months have served to confirm for us that a combined Samsung-SanDisk would have a superior global brand, an unparalleled technology platform and the scale and resources to drive convergence in the marketplace. With SanDisk’s innovative culture and technology leadership and Samsung’s scale, leadership in manufacturing and execution, and strong systems and consumer electronics segment knowledge, the combined company would be well positioned to accelerate the adoption of flash memory technology in new markets. We can also establish the platforms and capabilities necessary to position flash as the preferred vehicle for delivery and storage of a wide variety of content, such as film, in a way that would not be possible for either of our companies alone.

As we have seen in recent months, markets have become more turbulent and global economic trends are negative. At the same time the competitive environment remains challenging. To survive and compete in these times we will each need to leverage our resources and rely upon a strong balance sheet to fund critical investment and development through good times and bad. Separately investing in necessary state of the art facilities will be a significant tax on your business in the near term. In addition, reliance on IP and enforcing it is a costly and uncertain business for both our companies. Faced with these challenges, now is the time to merge.

SanDisk’s Management and Employees

SanDisk is widely recognized for the quality of its people and its culture of innovation. For our part, that is a key reason we are attracted to your company and a significant portion of the transaction value to us is represented by the talented management and employees that we hope would continue to work for the company going forward. Our intention is to operate SanDisk as a separate subsidiary company inside of Samsung and to maintain the environment that has contributed to your success. We have a long term commitment to the space, financial stability and a strong desire to grow the SanDisk platform, thereby creating significant new opportunities for SanDisk employees. We do not plan to cut jobs – rather, we want to work with you to find the best way to structure incentives to retain and motivate your key talent following the transaction.

Process and Deal Certainty

At our July 22 meeting in San Francisco you proposed a process in which Samsung would forego customary due diligence, not only until all transaction terms including price are finalized and documented, but also until we had completed negotiation and execution of a replacement IP licensing agreement and a new supply agreement, neither of which would ever come into effect if an acquisition transaction were finalized. You have also requested as a condition to moving forward that we provide you with some form of assurances as to regulatory approval.

Although there had been a lack of progress over 14 months of IP discussions, we dedicated significant time and energy to follow the path you outlined in order to reach an agreement. Unfortunately, the process you outlined in July has resulted in no meaningful progress toward a transaction in the intervening eight weeks. Despite our substantial efforts on the IP front, you have agreed to schedule only two meetings since July and during those meetings you have been unwilling to engage with us on any productive proposals that adequately recognize the changed market dynamics in your markets and the decline in value of your patent portfolio in the period since the IP license was last renewed.

As to the regulatory process, we have repeatedly expressed our confidence that this transaction will receive all necessary governmental approvals and we remain willing to immediately engage your experts to discuss the regulatory process. You have yet to even identify to us who is acting as your counsel on these issues. Having dedicated significant time and resources in evaluating this combination with our external counsel, we do not foresee any issues that could not be resolved. We again extend the invitation for your advisory team to engage with our counsel, subject to customary protective provisions, to share our respective views on this topic.

Confirmatory Due Diligence

Although we have completed extensive preliminary due diligence based on publicly available information, our proposal is of course subject to confirmatory due diligence and the negotiation of a definitive merger agreement. Key due diligence topics that underlie the value in our offer include your relationship with Toshiba, forecasted operating plans, R&D projects, technology roadmaps, key employees and pending litigation.

Again, it continues to be our strong preference to work together with the SanDisk Board to reach a mutually agreeable transaction. We have drafted and are prepared to send to you a due diligence request list and a draft merger agreement. We again urge you to engage with us promptly in a productive discussion about our proposal.


Yoon-Woo Lee
Vice Chairman and Chief Executive Officer
Samsung Electronics Co., Ltd.

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2.SanDisk Board Rejects Samsung Offer As Too Low

Posted by Eric Savitz September 17, 2008, 2:19 am

SanDisk (SNDK) said its board has rejected Samsung’s $26-a-share cash takeover offer as “inadequate in multiple respects” and not in the best interests of holders. The company actually rejected the offer in a letter to Samsung yesterday; Samsung responded by publicly disclosing its offer.

SanDisk contends the Samsung offer “does not reflect the value of the substantial synergies that Samsung can attain from an acquisition,” noting that Samsung previously indicated it might be willing to pay a premium to SanDisk’s $28.75 a share closing price on May 22, “the date Samsung first approached SanDisk with respect to an acquisition.”

SanDisk also branded the Samsung offer as “an opportunistic attempt to take advantage of SanDisk’s current stock price, which is significantly depressed given industry cyclicality, the uncertainty resulting from the unresolved patent cross license agreement renewal with Samsung, and general equity market conditions.”

The company says the offer in fact may be “a calculated negotiating ploy or an attempt to gain leverage in the ongoing licensing negotiations between the companies, particularly in light of the fact that the parties have met over 10 times on this issue since June 2007.”

The company said it remains willing to negotiate with Samsung, but that “due to Samsung’s unwillingness to meet fair and reasonable process conditions coupled with their desire to acquire SanDisk at a significant discount to our view of its intrinsic value, the Board believes that this proposal is not in the best interests of stockholders.”

Here’s a copy of the letter SanDisk sent to Samsung on Monday rejecting the offer:

September 15, 2008

Yoon-Woo Lee, PhD
Vice Chairman and Chief Executive Officer
Samsung Electronics Co., Ltd
Samsung Main Building
250, 2-ga, Taepyeongno
Jung-gu, Seoul 100-742
Republic of Korea

Dear Dr. Lee:

This letter confirms many of the points we raised when we met with you last week. We received your unsolicited, non-binding proposal dated August 9, 2008 to acquire SanDisk Corporation for $26 per share in cash. After a detailed review, with advice from our outside financial and legal advisors, our board of directors has unanimously concluded that your proposal significantly undervalues SanDisk given the longer-term prospects of our business and does not reflect the substantial synergies Samsung can obtain from the proposed acquisition. In addition, your proposal fails to provide adequate deal certainty, thereby exposing SanDisk and its stockholders to unacceptable risk. Finally, your approach raises the question of whether this action is simply an effort to gain leverage in the ongoing negotiations to renew our patent cross license agreement and evidences an unwillingness to engage in a process designed to legitimately protect SanDisk’s stockholders’ interests.

We acknowledge the interest that you have expressed in SanDisk over the past few months and, as expressed in the discussions we have had since May 2008, the SanDisk board of directors remains open-minded about a transaction that appropriately addresses the issues of value, deal certainty and process. However, for these and other reasons we believe your proposal is not consistent with the SanDisk board of directors’ objective of maximizing stockholder value and is not in the best interests of SanDisk’s stockholders.


While you emphasized that your offer is a premium of 56% over the stock price on the date of your non-binding proposal, in our meeting on May 22, 2008 you implied that Samsung was prepared to pay a significant cash premium over the then $28.75 price of SanDisk’s shares. Today, SanDisk’s share price is close to its lowest price in five years, and your offer represents a 55% discount to the 52-week high. SanDisk’s stock price is significantly depressed at this time given industry cyclicality, the uncertainty resulting from our unresolved patent cross license agreement renewal with you and general equity market conditions, and therefore does not reflect the intrinsic value of SanDisk’s business.

The flash memory business is a cyclical growth market, which is characterized by periods of strong growth and profitability such as we saw between 2002 and 2007, punctuated by periods of oversupply and declining flash prices like those we are experiencing today. Our board of directors is focused on creating long-term value for our stockholders and believes that SanDisk has the right strategy and the requisite financial resources to manage through a prolonged downturn and emerge as a stronger competitor. We are taking appropriate actions to further fortify our financial position and are confident that in the longer term we will benefit when exciting new flash applications, such as storage in multimedia handsets, flash solid state drives, and new consumer portable applications fuel the next period of industry profitability and growth.

You have described on numerous occasions the significant synergies that Samsung will achieve from acquiring SanDisk, one of the reasons why we believe you were willing to pay a significant premium over the $28.75 share price on May 22, 2008. Nothing has materially changed since that date in terms of the synergies Samsung can realize from acquiring SanDisk. These include avoiding billions of dollars of royalties over the coming decade; gaining access to our x3 (three bits per cell) and x4 (four bits per cell) knowhow; owning our advanced controller technology; owning all of the leading card formats; gaining control of our revolutionary 3D (three dimensional rewritable semiconductor memory) technology - the best candidate to replace NAND flash in the coming decade; controlling our strong brand, broad retail distribution and leading market share in flash cards worldwide; and other cost and revenue synergies.

We also note that the run rate of Samsung’s royalties to SanDisk continues to grow. Our view remains that without the right to use SanDisk’s patents, Samsung’s stand-alone NAND business’ prospects would be significantly compromised. Conversely, ownership of our fundamental patent portfolio would greatly strengthen your patent position in emerging markets for flash storage like SSDs and managed NAND chipsets. We hope that your current offer is not an attempt to capitalize on the uncertainty reflected in our share price while this IP issue remains unresolved or a negotiating tactic in the licensing negotiations. SanDisk’s stockholders deserve to be fairly compensated for the value SanDisk offers Samsung, and your current offer fails to recognize and monetize this value.


From the outset, we have expressed to you our concerns about the risks to SanDisk of moving forward with a transaction with Samsung if an announced transaction does not close. We note that any transaction between SanDisk and Samsung will be subject to regulatory review, including in the United States and the European Union. In addition, any announcement of a transaction with you could also have a negative impact on our business due to various factors. The simple, but important, point is that without both maximum certainty of closing as well as a viable path for SanDisk to continue as an independent entity should the transaction not close despite your best efforts, your proposal creates unacceptable risks for our stockholders and is not in their best interests.

Because of this, we have proposed negotiating a replacement cross license and supply agreement, both of which would become effective in August 2009 if an announced transaction does not close. We have also requested that you commit to certain terms to ensure that a transaction has maximum certainty of closing. Despite our repeated requests Samsung has failed to address these legitimate concerns.


We have been clear that together with price, these critical issues of deal certainty and risk mitigation must be addressed before we provide you due diligence access to the highly confidential and competitively sensitive information that you have requested. We note that there are sizeable synergies in this transaction for Samsung, most of which you control and can determine without access to confidential information. In addition, given that Samsung operates in the same industry and that SanDisk is a public company, we are confident that Samsung possesses the necessary information to address the issues we have highlighted above prior to gaining access to confidential information. However, despite our many attempts, including those by our lead outside director, Mr. Irwin Federman, to communicate the importance of these process issues and offering a reasonable roadmap by which we both can address them, you have rejected our guidance and instead insisted on access to highly confidential information about SanDisk before these issues are resolved.


The members of the SanDisk board of directors have taken, and will continue to take, their responsibilities to SanDisk’s stockholders extremely seriously. We remain committed to the goal of maximizing stockholder value. As Mr. Federman has said to you on multiple occasions, including in our recent meeting in Seoul, on September 11, 2008, the SanDisk board of directors is open minded about a transaction with Samsung if it represents a price that recognizes the long-term intrinsic value of SanDisk and the significant synergies that accrue to Samsung, provides deal certainty to SanDisk and can be conducted in a process that adequately protects the interests of SanDisk’s stockholders. Samsung’s current offer and approach falls well short on all counts. As such, we respectfully reject your proposal.

Very truly yours,

Eli Harari, PhD

Chairman of the Board and Chief Executive Officer

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3. Samsung Still Has Leverage On SanDisk

Tina Wang,/, Market Scan 09.17.08, 3:52 AM ET


Samsung Electronics is in a good position to keep its $5.85 billion bid for memory card packager and digital media player maker SanDisk alive, despite a Tuesday rebuff by SanDisk’s board, analysts say. The South Korean giant still has some tricks up its sleeve and can use the target company's shareholders, its lucrative business relationship with SanDisk and the industry downturn for leverage, they note.

SanDisk 's board firmly rejected Samsung’s unsolicited cash offer of $26 per share for the California-based firm. The price represents a 73% premium over SanDisk’s most recent closing price. Samsung, a major memory card manufacturer, is eager to get its hands on SanDisk’s array of patents.

Samsung has the stronger bargaining position of the two parties and may exercise pressure on SanDisk’s board, without resorting to a hostile takeover attempt, according to BNP Paribas analyst Peter Yu. SanDisk’s leverage is bound to slip over time as its business and market value suffer from an industry downturn, he said. A supply glut has depressed prices for memory cards made for consumer electronics such as digital cameras and portable music players this year. The downturn has led SanDisk shares to halve in value this year. “Given current market conditions, Samsung could easily acquire SanDisk,” agreed Greg Roh, an analyst for Korea Investment & Securities. Samsung is unlikely to raise its offer significantly to meet the $52 per share that Roh says SanDisk seeks.

Yu noted that SanDisk’s shareholders are mostly institutional investors, who may be tempted by the premium Samsung is offering. They may pressure the corporate board to not let Samsung walk away, which would prompt SanDisk shares to resume their downward trend, he said. Samsung's competitors also looked unlikely to start a bidding contest for SanDisk. Samsung has the deepest pockets in the field, even surpassing Japan’s Toshiba, he said.

Samsung can also threaten to withhold intellectual property royalties, a big source of income for SanDisk, and the resulting prolonged litigation process would be a headache for SanDisk, Yu remarked. A deal between them would be unlikely to the face regulatory hurdles that have been cited by some, according to both analysts. Roh estimated that Samsung and SanDisk’s combined market share would be around 55%.

Samsung’s bid reveals a turning point in its corporate approach. Roh said Samsung traditionally shied away from big acquisitions, but Chief Executive Yoon Woo Lee, who took the helm in May, has set his sights on dominating the electronics market.

In Wednesday trading in Seoul, Samsung Electronics shares ended unchanged, at 525,000 South Korean won ($463.06). In Tuesday trading in New York, SanDisk shares closed up 63 cents, or 4.4%, at $15.04.



4.Toshiba mulls bid to buy SanDisk

SAN JOSE, Calif. -- Is SanDisk Corp. on the block?

At first, the big rumor was that disk-drive giant Seagate Technology Inc. was interested in buying all or part of SanDisk, according to sources in the industry.

Then, South Korea's Samsung Electronics Co. Ltd. was considering acquiring flash-memory maker SanDisk, according to reports.

Now, in the latest rumor, it's Toshiba Corp. Seeking to derail Samsung's interest, Japan's Toshiba is ''interested'' in making a bid for SanDisk, according to Reuters.

"We need to take preventive steps, if (SanDisk) looks like it'll be acquired," said Shozo Saito, corporate senior vice president of Toshiba and president and CEO of Toshiba's Semiconductor Co., in the report from Reuters.

The rumors leave some to wonder if SanDisk is on the block. Like most others in the sector, SanDisk has recently struggled amid the NAND downturn.

At the same time, Toshiba can't afford to let Samsung buy SanDisk. If Samsung were to buy SanDisk, Samsung could gain a monopoly in NAND flash-memory devices, components and subsystems.

Besides, Toshiba and SanDisk have been NAND partners for several years. The two companies compete in the market, but they are also partners in a NAND chip venture.

SanDisk has a 49.9 percent ownership interest in Flash Partners Ltd., a business venture with Toshiba which owns 50.1 percent. Formed in fiscal year 2004, the 300-mm fab continues to produce NAND.

SanDisk has a 49.9 percent ownership interest in Flash Alliance Ltd., a business venture with Toshiba which owns 50.1 percent. Formed in fiscal year 2006, the 300-mm fab continues to produce NAND.

Earlier this year, Toshiba and SanDisk signed a non-binding memorandum of understanding on one of the new fabs, targeting a production start-up date in 2010, and a related production joint venture. Details of the fab, including site location, will be finalized as planning progresses.



5. SanDisk/Samsung merger put in doubt over financing, antitrust and partnerships issues

By Natalia Radziejewska and Colleen Taylor

Published: September 10 2008 13:41 | Last updated: September 10 2008 13:41

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This article is provided to readers by dealReporter—a news service focused on providing insightful intelligence on event driven situations to investors.


Samsung’s acquisition of SanDisk, the flash memory maker, is seen as unlikely, as the deal would encounter a long list of potential problems, two industry bankers and one industry executive told dealReporter.

On Friday, 4 September, Milpitas, California-based chipmaker SanDisk saw its share price jump USD 4.18, to USD 17.64, when James Chung, a spokesman for Samsung said “we are considering various opportunities regarding SanDisk, but nothing has been decided.” Chung’s statements where then followed by a filing with the Korean exchange.

Subsequent to the announcement, a SanDisk investor relations spokesperson confirmed that SanDisk has had “conversations” with Samsung, but refused to comment on the possibility of a sale citing company policy to not address “market rumors.”

The market’s excitement over the transaction is unwarranted, the two industry bankers said. “I don’t think it is that likely. It doesn’t seem that plausible to me,” said the first banker, who regularly deals with both companies.

The first banker said the unlikeness of the transaction going forward was related to integration and financial considerations. “[Samsung] would have to pay pretty much all cash for a deal and that would be pretty big amount,” he said. While capable of doing so, the banker believed is was unlikely this would happen. Were the electronics maker to need to produce more flash memory, they could build more facilities of their own, rather than make an acquisition. Samsung’s brand recognition is higher than that of SanDisk, the banker said. “I don’t think Samsung needs SanDisk,” he added.

Samsung has also been gun-shy with respect to US acquisitions, the first banker said. A second industry banker agreed saying, “We meet with them pretty regularly and they are always talking about doing deals, but ultimately, they never seem to do any.” The second banker said Samsung worries about retention of key employees after completing transactions, adding, “Some engineers in the US may not want to work for a Korean company.”

For Samsung to complete it first US acquisition, it would have to be very compelling, and a SanDisk deal does not qualify as compelling, the first banker added. “They historically looked at smaller deals and venture investments,” he noted. The second banker said the only acquisition he has seen Samsung make outside of Korea relatively recently was its purchase of Transchip, an Israeli chip company, in October 2007.

SanDisk itself is not showing much willingness to sell. An industry executive closely familiar with SanDisk’s management and corporate strategy said the situation may more closely resemble a hostile takeover effort from Samsung, as it is unlikely SanDisk’s CEO Eli Harari is keen to sell. “Eli is a world-class guy, and the talks [with Samsung] must have been serious, but I’m skeptical he would be interested in a sale,” the executive said. “Really, Eli wants to run his own company, and he cares a lot about his employees.”

The executive added that while the 62-year-old Harari may be planning to retire in the near future, he is a “different type of CEO than most.” Harari would be unlikely to willingly relinquish SanDisk’s independence, even if he does plan to depart the company, the executive said.

SanDisk’s pre-existing partnerships with Toshiba may also prove to be an impediment to a transaction. “In a way, it would destroy value because the second that deal happened, its not like Toshiba and Samsung are going to collaborate,” the first industry banker said. It would cause a lot of disruption in the market, as the two companies are not a marriage made in heaven, the banker said. “When you get into M&A, the devil is in the details,” said the second banker, referring to SanDisk’s agreements with Toshiba. A third industry banker agreed, saying the contracts between Toshiba and SanDisk could be too difficult to overcome for an agreement to be reached

Antitrust considerations may also stymie the deal. The first banker said Samsung, SanDisk and Boise, Idaho-based Micron Technology are all in the flash memory market. “I am not saying that the government would knock it down, but it would get a lot of scrutiny,” the banker said. Included in that scrutiny would be Samsung, something the first banker is not sure the company is ready for. “If there are three big players, I don’t see why two big players would create a better market,” said the banker.

Among the bankers and industry executives, there was no consensus on who could emerge as a rival bidder. The industry executive said Toshiba could emerge as a “white knight” in the transaction. Toshiba could prove to be a better strategic fit for the company given their prior partnership and because of similar corporate cultures at the two companies, the executive said. However, the second industry banker said Japanese companies, like their Korean counterparts, have also been reluctant to purchase companies outside of their home countries. In terms of completed acquisitions “there have only been a few in the past few years,” the second industry banker said.



6. Samsung Goes Hostile in Bid For Memory-Maker SanDisk/

Posted by: Cliff Edwards on September 16

Consumer electronics giant Samsung Electronics is taking off the gloves in its bid to acquire flash-memory maker Milpitas (Calif.)-based SanDisk Corp.

The company revealed it has made an unsolicited offer to buy SanDisk for $26 a share. The cash offer represents a whopping 93% premium over SanDisk’s closing share price on Sept. 4, when a South Korean newspaper reported that the two were talking about a combination. The offer would bring a 53% premium over Tuesday’s closing price of $15.04. SanDisk’s board of directors unanimously rejected the bid as undervalued.

Samsung said in five-page press release Sept. 16 that it has spent four months in meetings in Seoul and San Francisco trying to convince SanDisk executives that a combination of the two would better weather the ups and downs of the volatile industry than SanDisk going it alone.

Flash memory is used in all manner of digital devices, from the hit iPod to digital cameras and toys. But a glut of manufacturing and factory capacity has sapped profits for many of the big players over the last year. Analysts have steadily downgraded prospects for the industry; several recently recommended investors sell or hold SanDisk shares.

Since reports of the talks first surfaced, Wall Street analysts and industry watchers have been divided on whether Samsung is really serious about acquiring SanDisk.

Some suggest the larger company is more interested in gaining leverage as the two negotiate new royalties for technology they own related to making flash memory. The two companies have been in talks for about a year; a tie-up would save Samsung millions in royalty payments.

Others have suggested Samsung might be aiming to cut capacity in the marketplace and shore up declining prices for memory chips by taking SanDisk out of the equation.

The biggest flash-memory maker in the world, Samsung faces increasing competition from Intel, Toshiba and other rivals. By buying SanDisk, Samsung might be able to unwind joint manufacturing deals the smaller company has with Toshiba. And it gains access to the retail market where SanDisk dominates in sales of tiny flash storage cards and has its own line of digital music players.

In sharply-worded language, Samsung Electronics CEO Yoon-Woo Lee states SanDisk “continues to cling to unrealistic expectations on both its standalone market value and an appropriate merger price” because the smaller memory maker is holding out for an offer closer to its 52-week high of $55.98 a share. The bid values SanDisk at $5.85 billion—well above the $3 billion analysts recently suggested SanDisk might be worth.

The public release of the letter, dated Sept. 17, appears aimed at putting pressure on SanDisk CEO Eli Harari to enter in serious negotiations. It only implies it will take its fight directly to shareholders, offering no timetable for SanDisk executives to respond.

A SanDisk spokesman said Samsung execs in recent talks had suggested the smaller company is worth significantly more than $26 a share. In its own statement, SanDisk suggested the bid is an “opportunistic attempt” to take advantage of the company’s depressed stock price and turmoil in the financial markets. The company also suggested it could be a negotiating ploy to win better licensing terms for SanDisk technology.

Shareholders may find the offer tempting, forcing SanDisk’s board to negotiate. Still, the deal could face antitrust scrutiny, given the size of the relative players in the market. Samsung indicated that SanDisk executives have sought assurances such a combination would pass muster with regulators.

Samsung said if a takeover is successful, it will operate SanDisk as a subsidiary and not cut jobs.

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