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SanDisk bolsters defences with Toshiba deal

21 октября 2008

SanDisk, the US flash-memory cardmaker being targeted by South Korea’s Samsung Electronics, shored up its takeover defences on Monday by offloading $1bn of production equipment to Toshiba, its Japanese joint venture partner.

Under the deal, SanDisk will sell Toshiba a 15 per cent share of their manufacturing joint ventures in Japan. The agreement will give Toshiba, which is likely to pay cash of between $350m and $500m and assume some of SanDisk’s equipment lease obligations, an economic stake of 65 per cent. However, it will be structured so that Toshiba has sole ownership of some capacity while the rest is equally shared.

Monday’s announcement comes just a month after SanDisk rebuffed a $5.85bn takeover offer from Samsung, the world’s largest maker of flash memory. Analysts speculated that while Samsung wanted intellectual property rather than more production facilities, SanDisk’s deal with Toshiba would bolster the US company’s balance sheet and make it less vulnerable to a takeover.

Eli Harari, chairman and chief executive of SanDisk, said the deal “is expected to reduce our capital spending, strengthen our financial position and increase our business flexibility”.

In addition to an expanding market in mobile devices such as Apple’s iPod, flash-memory chips – which allow rapid access to data and have no moving parts – are starting to replace hard-disk drives in notebook computers. However, the industry is experiencing losses because excess supply has caused a collapse in prices.

Conditions are particularly tough for SanDisk, which is smaller than its main competitors. In July, Standard & Poor’s cut its credit rating on the US company to B+, which put SanDisk in breach of covenants to the banks that lease equipment to its Toshiba joint ventures and increased its vulnerability to a bid. Monday’s deal puts a new lease in place, reducing SanDisk’s liabilities.

Toshiba said that sole ownership of some 30 per cent of the Yokkaichi manufacturing facilities would increase its flexibility to adjust production volumes in line with demand, but admitted that it would have to try hard to sell the extra output.

Damian Thong, an analyst at Macquarie Securities in Tokyo: “I think it is an opportunity for both sides to make better use of their existing production capacity”.

Kim Gee-soo at Goodmorning Shinhan Securities in Seoul said the transaction would “make Samsung’s possible acquisition of SanDisk more complex because Samsung now has to revalue the deal”.

Samsung declined to comment.


Источник: Financial Times

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