Samsung backs out on SanDisk acquisition

South Korea - Samsung Electronics has withdrawn its US$5.9 billion unsolicited bid to buy top memory chip maker SanDisk, a deal that could have widened Samsung's lead over Toshiba in the flash memory chip market.

Samsung said the reason for its retraction is that it no longer believes the US-based firm is worth the investment.

A breakdown in negotiations became apparent last month, when Samsung expressed disappointment that SanDisk "clings to unrealistic expectations" about its market value.

SanDisk responded, saying it rejected Samsung's offer as "opportunistic" and an undervaluation of the company.

Lee Yoon-woo, CEO of Samsung said in a letter to SanDisk management: "Your surprise announcements of a quarter billion dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organization all point to a considerable increase in your risk profile and a material deterioration in value, both on a stand-alone basis as well as to Samsung," he said

"After nearly six months of efforts to pursue a transaction with no meaningful progress, we are withdrawing our proposal to acquire SanDisk" Yoon Woo-Lee, vice chairman of Samsung added.

Earlier this week, SanDisk reported a second consecutive quarterly loss. The weak consumer demand for devices using flash drives is expected to continue in decline as global growth remains sluggish.

Analysts had earlier predicted that Samsung might withdraw its bid.

"Samsung probably has decided that as the memory chip market continues to weaken, the kind of price SanDisk was asking wasn't what they were willing to go along with," said Kim Young-june, analyst at KTB Investment.

On the contrary, some analysts believe Samsung's wording hinted it had not abandoned its pursuit of SanDisk altogether.

Song Myung-sup, analyst at HI Investment and Securities said, "This doesn't necessarily mean Samsung is giving up SanDisk for good."

James Chung, a Samsung spokesman said, "We will continue to evaluate all options available, including strategic alliance and business combinations and other initiatives, that serve the interest of company shareholders."

Samsung had previously announced considering potential joint ventures or alliances at home and abroad to foster growth.

The deal would have helped Samsung widen its lead over Toshiba in the flash memory chip market.