SanDisk Gets Buyout Offer (Update)

Reports surfaced earlier this month that the company was exploring a deal with SanDisk, whose share price and financial performance have plunged in recent months as a result of a massive oversupply of flash chips.

Samsung's bid of $26 a share appears to value SanDisk at $5.85 billion, based on SanDisk's number of shares outstanding as of June 29. Samsung said it would pay for the deal with cash on hand and available financing, and said the offer represents a 94% premium from SanDisk's closing price on Sept. 4, the day before reports of a deal first surfaced.

Shares of SanDisk jumped 54% or $8.11, to $23.15 in extended trading Tuesday.

A deal with Samsung would raise numerous regulatory and antitrust issues, since the combined company would control more than 50% of the world's supply of NAND flash chips.

And Samsung may not be the only bidder. An executive at Toshiba, another maker of NAND flash chips that runs several manufacturing facilities with SanDisk, was quoted in reports Tuesday that the company would take "preventative steps" if it looks like Samsung intended to acquire SanDisk.

In his letter, Samsung's Lee notes that the company is confident the transaction would receive all necessary government approvals, and states his willingness to consult SanDisk's lawyers to assess the regulatory issues.

In a sign that the deal may be heading into hostile territory though, Lee notes that SanDisk has yet to inform Samsung who its lawyers are for the regulatory issues.