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SanDisk 30% Capacity Sale Suggests Takeover Imminent?

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Could this latest twist finally secure the path for SanDisk - and its wealth of tasty patents - to be bought out?

In a move which will certainly make SanDisk more bite size, the flash memory specialist has announced an agreement to sell 30 per cent of its NAND memory production capacity to Toshiba. The move will net SanDisk a cool $1bn and would reduce the potential for overlap with a large buyer such as the hotly tipped Samsung.
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The essence of the deal itself centres around two Japanese factories which SanDisk and Toshiba had shared equally but of which the latter while now take a far higher proportion.

Now given demand for flash memory is expected to accelerate even faster over the next few years SanDisk's shift in focus to its patents (it holds rights or joint rights to produce every form of flash memory) and third party outsourcing to build the likes of its successful Sansa MP3 players is an interesting and highly calculated step.

In a remarkably short statement, SanDisk CEO Dr. Eli Harari explained "We appreciate Toshiba's strong support for SanDisk through this agreement. This is expected to reduce our capital spending, strengthen our financial position and increase our business flexibility while maintaining the economies of scale of Fabs 3 and 4."
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'Flexibility' is the key phrase here - and SanDisk knows it. The deal allows SanDisk to choose whatever future it wants while making it infinitely more appealing to any hugely ambitious industry player. Yes, upfront SanDisk may continue to resist a takeover but conversely the balls may already now be in motion.

Samsung remains favourite, but my hot tip is not to rule out a late move from Seagate...

Update: In a rather surprising twist Samsung has now pulled its on-table offer for SanDisk with CEO Lee Yoon-woo stating "After nearly six months of efforts to pursue a transaction with no meaningful progress, we are withdrawing our proposal to acquire 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."

SanDisk has retorted that Samsung has "never contacted SanDisk regarding their proposal... we believe this raises questions about the real motivations behind Samsung's offer."

Over to you Seagate...

Link:
Press Release

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