SanDisk Rejects $5.8 Bln Samsung Offer

South Korea's Samsung has made a $5.8 billion offer for SanDisk...and SanDisk has rejected the cash as "inadequate."

South Korea’s Samsung has been courting flash storage maker (and media player manufacturer!) SanDisk for some time, but apparently ran out of patience and placed an offer of $26 per share—some $5.8 billion— in cash on the table. In its letter to SanDisk’s board, Samsung CEO Yoon-Woo Lee claimed that after four months of talks, SanDisk continued to “cling to unrealistic expectations” about its market value.

SanDisk, in turn, flatly rejected the buyout offer, characterizing Samsung’s the $5.8 billion as “inadequate,” and saying that Samsung had previously indicated it was willing to pay a significant premium on top of $28.75 per share, which was SanDisk’s stock price when Samsung first approached the company about a deal back in May. It also said Samsung wasn’t willing to agree to protection for SanDisk stockholders in the event a deal is struck but winds up falling through.

SanDisk’s stock had been trading at $15.04 at the end of regular session trading before news of the buyout rejection hit. SanDisk blames its “significantly depressed” stock price on industry cycles, general market conditions, and uncertainty surrounding a patent licensing renewal with Samsung.

Samsung is itself a huge manufacturer of NAND flash memory, which is used in everything from media players and cameras to thumb drives and personal computers. However, the market is currently facing an oversupply situation and strong pricing pressure, combined with a drop in consumer spending. Samsung holds out a merger to SanDisk as a way to insulate the company from declining market conditions. However, SanDisk may think it can land a better deal: industry reports have also had Toshiba and Seagate taking an interest in SanDisk.