Money Matters - Simplified

The Korean Acquisition That Wasn't

There will be no SamDisk or Sansung. Korean technology giant Samsung has officially dropped its plans to acquire American gadget maker SanDisk (Nasdaq: SNDK).

This wasn't a shock by any means. The market took Samsung's $5.85
billion offer semi-seriously for a while, giving SanDisk's stock a
short-lived boost last September, but SanDisk's management team called
the bid "inadequate" and "opportunistically timed." I thought Samsung
would respond with a higher bid, because SanDisk has a serious
footprint in major retail channels like Wal-Mart Stores (NYSE: WMT) and Best Buy (NYSE: BBY) -- and Samsung was paying hefty licensing fees for some memory technologies SanDisk had under patent protection.

But then the Crash of 2008 happened. American retail didn't look so tempting anymore,
and Samsung's higher bid never happened. Investors lost hope early,
dropping SanDisk far below the S&P 500 benchmark. SanDisk's stock
price has fallen around 25% from its buyout speculation highs last year
despite a very impressive bounce from lows approaching $5. Meanwhile,
my finest research source (Capital IQ, a division of Standard &
Poor’s) shows that Samsung Electronics did all right without this
acquisition, and that stock rose by about 50% on the Korea Exchange.

Sometimes I wish I could invest in Samsung.
I mean, yeah, there's a handful of Samsung tickers floating about the
Pink Sheets and anybody could buy those today. But it is nearly impossible to get decent information
about this foreign stock, and there are absolutely no guarantees that
the Pink Sheet tickers reflect Samsung's true value. Capital IQ is
great, but even that high-priced professional resource can't be fully
trusted when it comes to foreign stocks in companies that don't want to
deal with SarbOx regulations. No Samsung stock for me, then -- no
matter how much I admire the company itself.

So, we prudent tech investors are stuck with stocks we can actually do research on, like Apple (Nasdaq: AAPL) for the daring and Sirius XM Satellite Radio (NYSE: SIRI) for the true daredevils.
And SanDisk is officially stuck being SanDisk, now trading at a 33%
discount to the old offer that was rejected for being too cheap.

Maybe a merger of near-equals between SanDisk and American memory rival Micron (NYSE: MU) would make more sense than a big-name buyout from abroad. Either way, the whole memory sector is trying to consolidate, and I fully expect SanDisk to join that trend within the next year or so. SanDisk's CAPS page is brimming with further analysis and takeover speculation, and CAPS is ready to hear your thoughts on the subject.

 

Copyright 2009 by United Press International.