, shares surged more than 50% in extended trading Tuesday, after


went public with an offer to purchase the chipmaker for $26 a share.

In an announcement after Tuesday's close of market, Samsung sought to turn the heat up on SanDisk by laying its case out to shareholders as discussions between the two companies appeared to have reached an impasse.

After four months of negotiations, SanDisk "continues to cling to unrealistic expectations on both its standalone market value and an appropriate merger price," Samsung CEO Yoon-Woo Lee said in a letter to SanDisk's board of directors dated Sept. 17.

Citing what he contends is SanDisk's reference that the offer undervalues the chipmaker relative to its 52-week high of $55.98, Lee said "the world has changed dramatically in the past 52 weeks as can be seen from SanDisk's own disappointing results."

SanDisk fired back with its own statement, accusing Samsung of attempting to take advantage of its current stock price "which is significantly depressed given industry cyclicality," and suggesting that the offer is a "calculated ploy" by Samsung to gain leverage in the ongoing licensing negotiations between the two chipmakers.

What's more, when Samsung initially approached SanDisk on May 22, the company said it was willing to pay a significant premium to SanDisk's $28.75-a-share closing price that day, SanDisk said.

South Korea's Samsung is the world's No.1 maker of NAND flash memory, a type of chip that is increasingly popular in electronic gadgets like cell phones, digital cameras and MP3 players like


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popular iPod.

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


, 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.

Another sticking point appears to be the intellectual property licensing agreement between the two companies, which brings SanDisk hundreds of millions of dollars of royalty revenue a year, and which expires in August 2009.

According to Lee's letter, SanDisk has insisted on limited access to each others' books until the IP agreement is renewed.

"Despite our substantial efforts on the IP front, you have agree to schedule only two meetings since July and during those meetings you have been unwilling to engaged with us on any productive proposals that adequately recognize the changed market dynamics in your markets and the decline in value of your patent portfolio," Lee writes.