Reaction: SanDisk Acquisition of Msystems
SanDisk, the world's largest supplier of flash memory, announced its intent to purchase Israeli data-storage provider M-Systems Flash Disk Pioneers Ltd, for $.155 billion on Monday.
The deal is an all stock transaction, with each share of M-Systems shares being converted to slightly over three-quarters of SanDisk common stock, representing a 26% premium over the average selling price of M-Systems for the last 30 days.
Though M-Systems CEO Dov Moran has been downplaying the deal for quite sometime, experts have long predicted the deal, contending that M-Systems needs NAND chips and SanDisk can supply them.. M-Systems has see sales increase more than 20 times since 2001, but has been hampered in past by supply constraints and low margins due to NAND costs. With the current deal with SanDisk, they have now access to foundry, facilitating ongoing growth.
SanDisk also stands to benefit. In the near term, Experts contend that M-Systems' Mobile DiskOnChip product should complement SanDisk's focus in the removable storage card market. SanDisk should also benefit from M-Systems' extensive relationships with handset and smart phone OEMs.
We remain positive on SanDisk's long-term prospects, as we believe NAND flash
is one of the best growth opportunities in the semiconductor industry Sidney Ho in a note to clients, issued Monday morning. In our view SanDisk is uniquely positioned to benefit from this market because of its manufacturing capabilities and its established brand name.
The deal is expected to close in the fourth quarter, the deal is still subject to traditional regulatory approval, Israel court approval, and M-Systems share holder approval.
The deal comes as M-Systems attempts to shake off a options backdating investigation that delayed a stock offering planned for this past May.
M-Systems is one at least 61 companies under review by the Securities and Exchange Commission or the Department of Justice for allegedly backdating stock option grants to coincide with share lows to boost executive profits.
SanDisk is down 24 cents to $46.90. M Systems is up $4.05 at $35.84 in morning trading.
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