Combination Would Deliver Substantial Immediate And Long-Term Value to Shareholders of Both Companies
Combined Business Would Have Superior Global Brand, Unparalleled Technology Platform and Scale, and Resources to Drive Convergence
Seoul, Korea, September 17, 2008 – Samsung Electronics (005930:KS) (“Samsung”)
today announced that it has sent a letter to the Board of Directors of SanDisk (NASDAQ:
SNDK) (“SanDisk”) reiterating its proposal to acquire SanDisk for $26 per share in cash.
The full text of the letter follows:
September 17, 2008
Board of Directors
SanDisk Corporation
601 McCarthy Boulevard
Milpitas, CA 95035
Attention:
Dr. Eli Harari, Chairman and Chief Executive Officer
Mr. Irwin Federman, Vice Chairman and Lead Independent Director
Dear Eli and Irwin:
We are in receipt of your letter dated September 15, 2008 and are deeply disappointed that
after four months of discussions and meetings – in Seoul and San Francisco – about a possible
business combination, 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.
Despite the significant premium we propose to SanDisk’s current stock price, your letter
states that our proposed price does not “reflect the intrinsic value of SanDisk’s business”
and references the 52-week high. The world has changed dramatically in the past 52
weeks as can be seen from SanDisk’s own disappointing results. Consumer spending and
the overall economic situation have been getting worse. It will take the NAND flash
market quite a bit of time to recover. Notwithstanding the current market conditions, to
stay competitive, SanDisk will need to fund critical investment and development over the
next several months – cost cutting alone will not suffice. Our offer insulates your
shareholders from the risk of market conditions that have severely deteriorated and are
expected to remain challenging. As highlighted above, we strongly believe that there is
significant execution risk of achieving any stand-alone plan.
While it has been and remains our strong preference to continue to work with you to reach a
binding merger agreement in a cooperative and expeditious fashion, we have become
increasingly concerned that the lack of progress is not serving the interests of either
company’s shareholders. For this reason, and the fact that speculation has grown since the
early September news reports, we feel compelled to clarify our intentions publicly.
Compelling Business Logic
Our many meetings and conversations over the last several months have served to confirm for
us that a combined Samsung-SanDisk would have a superior global brand, an unparalleled
technology platform and the scale and resources to drive convergence in the marketplace.
With SanDisk’s innovative culture and technology leadership and Samsung’s scale, leadership
in manufacturing and execution, and strong systems and consumer electronics segment
knowledge, the combined company would be well positioned to accelerate the adoption of
flash memory technology in new markets. We can also establish the platforms and
capabilities necessary to position flash as the preferred vehicle for delivery and storage of a
wide variety of content, such as film, in a way that would not be possible for either of our
companies alone.
As we have seen in recent months, markets have become more turbulent and global economic
trends are negative. At the same time the competitive environment remains challenging. To
survive and compete in these times we will each need to leverage our resources and rely upon
a strong balance sheet to fund critical investment and development through good times and
bad. Separately investing in necessary state of the art facilities will be a significant tax on your
business in the near term. In addition, reliance on IP and enforcing it is a costly and uncertain
business for both our companies. Faced with these challenges, now is the time to merge.
SanDisk’s Management and Employees
SanDisk is widely recognized for the quality of its people and its culture of innovation. For
our part, that is a key reason we are attracted to your company and a significant portion of the
transaction value to us is represented by the talented management and employees that we hope
would continue to work for the company going forward. Our intention is to operate SanDisk
as a separate subsidiary company inside of Samsung and to maintain the environment that has
contributed to your success. We have a long term commitment to the space, financial stability
and a strong desire to grow the SanDisk platform, thereby creating significant new
opportunities for SanDisk employees. We do not plan to cut jobs – rather, we want to work
with you to find the best way to structure incentives to retain and motivate your key talent
following the transaction.
Process and Deal Certainty
At our July 22 meeting in San Francisco you proposed a process in which Samsung
would forego customary due diligence, not only until all transaction terms including price
are finalized and documented, but also until we had completed negotiation and execution
of a replacement IP licensing agreement and a new supply agreement, neither of which
would ever come into effect if an acquisition transaction were finalized. You have also
requested as a condition to moving forward that we provide you with some form of
assurances as to regulatory approval.
Although there had been a lack of progress over 14 months of IP discussions, we
dedicated significant time and energy to follow the path you outlined in order to reach an
agreement. Unfortunately, the process you outlined in July has resulted in no meaningful
progress toward a transaction in the intervening eight weeks. Despite our substantial
efforts on the IP front, you have agreed to schedule only two meetings since July and
during those meetings you have been unwilling to engage 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 in the period since the IP license was last
renewed.
As to the regulatory process, we have repeatedly expressed our confidence that this
transaction will receive all necessary governmental approvals and we remain willing to
immediately engage your experts to discuss the regulatory process. You have yet to even
identify to us who is acting as your counsel on these issues. Having dedicated significant
time and resources in evaluating this combination with our external counsel, we do not
foresee any issues that could not be resolved. We again extend the invitation for your
advisory team to engage with our counsel, subject to customary protective provisions, to
share our respective views on this topic.
Confirmatory Due Diligence
Although we have completed extensive preliminary due diligence based on publicly available
information, our proposal is of course subject to confirmatory due diligence and the
negotiation of a definitive merger agreement. Key due diligence topics that underlie the value
in our offer include your relationship with Toshiba, forecasted operating plans, R&D projects,
technology roadmaps, key employees and pending litigation.
Again, it continues to be our strong preference to work together with the SanDisk Board to
reach a mutually agreeable transaction. We have drafted and are prepared to send to you a due
diligence request list and a draft merger agreement. We again urge you to engage with us
promptly in a productive discussion about our proposal.
Sincerely,
Yoon-Woo Lee
Vice Chairman and Chief Executive Officer
Samsung Electronics Co., Ltd.
Financial and Legal Advisors
Samsung has engaged J.P.Morgan Chase & Co. and Allen & Company LLC as its
financial advisors, and Sullivan & Cromwell LLP as its legal advisor in connection with
the proposed transaction.
About Samsung Electronics
Samsung Electronics Co., Ltd. is a global leader in semiconductor, telecommunication,
digital media and digital convergence technologies with 2007 consolidated sales of
US$103.4 billion. Employing approximately 150,000 people in 134 offices in 62
countries, Samsung consists of four main business units: Digital Media Business, LCD
Business, Semiconductor Business and Telecommunication. Recognized as one of the
fastest growing global brands, Samsung is a leading producer of digital TVs, memory
chips, mobile phones and TFT-LCDs. For more information, please visit
www.samsung.com.
Forward Looking Statements
This press release contains forward-looking statements, including those related to
Samsung’s proposal to acquire SanDisk, which are subject to various risks and
uncertainties, which could cause actual events or actual results to differ materially from
those expressed or implied in the forward-looking statements contained in this press
release. Among other factors, the proposed transaction described in this press release
could be affected by whether the proposed transaction receives the support of SanDisk
and can be completed timely and successfully as well as changes in the economic and
business environment. Many of the factors that will determine the outcome of the subject
matter of this press release are beyond Samsung’s ability to control or predict. All
information in this press release is as of September 16, 2008 and Samsung disclaims any
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise.
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