SanDisk plays hard to get as Samsung (and maybe Toshiba) eye takeover

Samsung is making a hostile bid for SanDisk for $26 a share in cash, or almost double SanDisk's current stock price. SanDisk promptly said no to Samsung's overtures. And why not? Toshiba may be interested too.

In a letter to SanDisk's board, Samsung CEO Yoon-Woo Lee said:

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.

Translation: SanDisk is smoking something given its current struggles. The flash memory market stinks and so will SanDisk's results.

SanDisk fired back (Techmeme) and said that Samsung "significantly undervalues SanDisk given the long-term prospects of its business" and doesn't reflect synergies that are possible. SanDisk is arguing that Samsung is "an opportunistic attempt to take advantage of SanDisk’s current stock price." Well duh. That's called capitalism kids.

So why is SanDisk so cocky and playing hard to get? Perhaps Toshiba is a potential buyer. Reuters reported that Toshiba was interested in making a bid too. Bloomberg, however, reported that Toshiba is denying the Reuters report. In any case, SanDisk thinks it can get more for the company, but it better not overplay its hand.