Samsung backs away from SanDisk
South Korean electronics group Samsung has withdrawn its bid to take over memory manufacturer SanDisk after the American vendor rejected Samsung's offer of about $5.8B as being too low. After six months of negotiations, Samsung said that the uncertain economic climate and doubts about SanDisk's value as the reasons for its withdrawal.
The global economic climate has changed noticeably since Samsung offered to pay SanDisk $26 a share. Following the recent announcement of high quarterly losses, SanDisk's shares were traded at $14. In addition, SanDisk finalised an agreement with Toshiba that the Japanese company would take ownership of two fabs that the companies had operated as a joint venture. Some observers consider this agreement – which grants Toshiba two thirds of the fabs' production capacity – as the 'poison pill' for fending off Samsung's takeover bid.
Samsung was probably also interested in SanDisk's intellectual property. The Korean company pays the Americans $500M a year in royalties. For this and other reasons, it's not impossible that Samsung will approach SanDisk with a lower offer. However, a takeover of this magnitude is not a petty cash transaction even for Korea's biggest corporation – it too is feeling the effects of a cooling economy, and its export business is further affected by the weakness of the Korean currency.