With SanDisk's share price well below the offer price for the company by Samsung, it seems that the markets do not hold out a lot of hope for the takeover attermpt being successful.
Nonetheless the Samsung bid of $26 was a brilliant bit of timing because SanDisk's shares had, before Samsung's bid, fallen down to $13 on the back of a hugely over-supplied NAND chip market and plummeting prices, while Toshiba was about to announce, as it did last week, that the whole corporation would make a loss in the current quarter because of the poor conditions in the NAND market being experienced by its chip division.
This means Toshiba would be unlikely to look kindly on the idea of making its own offer to buy SanDisk, a move which would cost it over $6 billion.
Toshiba and SanDisk own a couple of 300mm joint venture fabs, with SanDisk owning 49.9 per cent, and Toshiba owning 50.1 per cent. The two companies are closely inter-linked on technology development and IP-sharing. Unravellling all this in the wake of a takeover by Samsung would be a nightmare.
Whereas Toshiba, as the inventor of flash technology, has many of the fundamental patents on the device side, SanDisk as the leading seller of packaged flash products has many of the fundamental patents on the packaging side.
Samsung is said to be paying $400 million a year in royalties to SanDisk, but has never answered the question: Does it pay royalties to Toshiba? Toshiba originally licensed Samsung to be a second source for NAND flash, but refuses to say whether it gets any royalties from Samsung under the license agreement.
So Samsung, if it buys SanDisk, would immediately save itself $400m a year. It would also scupper Toshiba's declared ambition that it wants to overtake Samsung in the flash business and become the No.1 player. Samsung currently has 42 per cent of the market and Toshiba 27 per cent.
Somehow, I can't see Eli Harari, SanDisk's CEO and Sanjay Mehrotra, President, wanting to give up control of the company and, although they do not have significant shareholdings, their influence with shareholders is going to be heavy, and they can point to a share price above $55 in the not so recent past before the NAND business turned down.
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