SanDisk Corporation (Nasdaq: SNDK) and M-Systems Flash Disk Pioneers (Nasdaq: FLSH) announced last night that they had entered into definitive agreements for SanDisk to acquire M-Systems in an all stock transaction. Such a deal has been the subject of market speculation for some time.
In the transaction, each M-Systems ordinary share will be converted into 0.76368 of a share of SanDisk common stock, representing a 26% premium over the average closing price of M-Systems' shares for the last thirty trading days, but a premium of just 13% over M-Systems' closing price on Friday. The closing of the transaction is subject to conditions, including, among others, Israeli court approval, regulatory approval, and M-Systems shareholder approval.
The transaction is expected to close in the fourth quarter of 2006
SanDisk chairman and CEO Eli Harari said, "SanDisk and M-Systems, over the past 18 years, have been leading innovators in the flash storage market. This strategic acquisition will give us the critical mass and complementary products, customers, channels, technology and manufacturing base to take our shared vision to the next level.
"The NAND flash data storage business is in its early stages and we believe the market opportunity is largely untapped. M-Systems is a leader in flash memory systems addressing mobile, portable and embedded markets and they have a strong team, significant IP and important OEM customers. SanDisk has a record of creating new market categories, world-class manufacturing capabilities and leading market share in the retail channel.
"Both companies are noted for their relentless innovation, and this acquisition is intended to further accelerate our pace of innovation. In the near term, this transaction better positions SanDisk to serve the expanding storage needs of handset manufacturers and mobile network operators. In the long term, the combination with M-Systems will be a catalyst in the development of next generation flash enabled consumer applications.
"We are extremely excited about joining forces with the M-Systems team to achieve our shared vision. We are committed to serving M-Systems' OEM customers after the transaction closes."
M-Systems chairman and CEO Dov Moran said, "From mDOC to megaSIM, from U3 to x4, M-Systems is creating new markets through innovation. We are truly proud of our achievements to date. This strategic deal will enable us to continue supporting our OEM customers, to whom we remain fully committed, and strengthen our innovation and product offering with SanDisk's leading edge, low-cost fab capacity.
"This deal has synergy at its core, encompassing people, technology, products and customers. Based on our shared vision, as well as our teams' history of successful and fruitful cooperation, I am confident we can succeed in achieving the goals we set for ourselves. I also believe that SanDisk's extensive silicon expertise will prove itself as a strong catalyst to productizing our revolutionary x4 technology as well as other future innovations."
SanDisk: Activity will stay in Israel unchanged
SanDisk executive VP and CFO Judy Bruner said, “The two companies complement each other. M-Systems will benefit from using SanDisk’s production capacity, which is jointly held with Toshiba. Over the next two years, SanDisk intends to invest $5 billion in expanding its production capacity. In any event, there will be no change in M-Systems’ activity in Israel.”
Bruner added that SanDisk’s management studied M-Systems’ situation as far as irregularities over stock option grants were concerned, and that it was ready for every scenario. On the eve of a planned $300 million offering in June, M-Systems announced that it was launching an internal inquiry into past stock option grants.
M-Systems appointed an internal investigation committee, which launched an informal inquiry. The US Securities and Exchange Commission (SEC) entered the picture at the same time. M-Systems’ investigation committee concluded that there were 34 cases of irregular stock option grants, and that the company should restate its financial reports and write off $18.8 million from its profits for 1999-2005.
M-Systems’ investigation committee also recommended that Moran should not simultaneously serve as chairman and CEO, but should find a replacement for one of these positions. The committee also recommended that M-Systems’s longstanding CFO, Ronit Maor, should be appointed COO after a successor is found. The company’s board accepted the recommendations.
The mission: x4
Market source predict that, among other things, SanDisk and M-Systems will combine forces on M-Systems’ new x4 processor, which has not yet been launched on the market. The x4 flash processor can save four bits of information on each memory cell.
Published by Globes [online], Israel business news - www.globes.co.il - on July 31, 2006
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