Disk trouble

October 22, 2008

Sandisk flash memory cardsAnother day, another round of hand-wringing: Do I, or don’t I? That seems to be the mantra of top executives mulling buys in what continues to be a rocky market while those on the receiving end are left wondering will he, or won’t he?

So far, it ain’t looking good — for the sellers, or the buyers.

Late last night, Samsung Electronics Co Ltd, the world’s top memory chip maker, decided to dump its pursuit of flash memory card maker SanDisk Corp. That unsolicited deal would have been worth $6 billion, but Samsung apparently got cold feet after seeing SanDisk’s wider-than-expected quarterly loss.

“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,” Samsung CEO Lee Yoon-woo wrote to SanDisk management in a letter disclosed by Samsung on Wednesday.

As a result of these developments, we are no longer interested in acquiring SanDisk at $26/share.”

Ouch. At least Lee won’t be accused of beating around the bush.

The move, of course, wasn’t a big surprise. Many investors had been doubtful a deal would get down in the first place, given that the spread between Samsung’s offer price and SanDisk’s trading price was 80 percent, according to Reuters data.

But it’s also another sign that caution rules these days. As reporter Jessica Hall pointed out in her DealTalk column earlier this week, even marquee mergers have become more difficult and costly to close amid an ongoing credit freeze and financial crisis.

Look at GE and its appliance unit. That dance card has been open since May and suitors remain reluctant. Reporter George Chen, in another DealTalk column, points out that potential buyer Haier, China’s largest home appliance maker, plans not to bid for the unit until it sees clear signs of a U.S. market recovery. Chen was citing people with direct knowledge of the matter.

Meanwhile, General Motors is looking for a large investment from outside investors as a possible alternative to a deal with Chrysler, the Financial Times reported on Tuesday. GM and Chrysler have been in merger talks in an attempt to shore up cash and survive an industry slump, sources have said.

As the old saying goes, money makes the world go round. But the globe doesn’t appear to be spinning very fast these days.

More Deals of the Day:

** Japan’s largest beer maker Asahi Breweries Ltd is in a leading position in a bid for Groupe Danone’s Australian and New Zealand businesses, which could be worth up to A$1 billion ($678 million), a financial source said.

** Samsung Electronics Co Ltd, the world’s top memory chip maker, dropped a $5.9 billion unsolicited bid for flash memory card maker SanDisk Corp, citing the U.S. company’s deepening losses and uncertain outlook.

** Barnsley Building Society is to merge with larger UK rival Yorkshire Building Society after revealing a possible 10 million pound writedown from its exposure to two Icelandic banks, the companies said in a joint statement.

** Nissan Motor Co is proposing to buy about 20 percent of Chrysler and bring the troubled automaker into the Franco-Japanese alliance with Renault SA , the Detroit News reported, citing sources familiar with the situation.

** British Gas owner Centrica Plc said it bought Semplice Energy Ltd, a clean technology services provider, for up to 1.5 million pounds ($2.53 million) in cash to expand its range of energy efficiency and low-carbon capabilities.

** Legal and professional fee insurer Abbey Protection Plc said it would acquire three companies in the Accountax fold for an initial consideration of 4.4 million pounds ($7.4 million).

** Shares in global miner and takeover target Rio Tinto Ltd jumped 5 percent in a weak market, swept up by rumours ranging from a sweetened cash bid by BHP Billiton to a Chinese counter-bid.

** Wind turbine maker Clipper Windpower Plc said it has completed a joint venture agreement with an energy unit of oil major BP Plc for the development of a windfarm in U.S.

** Spain’s largest property company Martinsa Fadesa said its 50 percent owned Moroccan unit has sold assets for 165.7 million euros ($218.5 million), making a pretax gain of nearly 43 million.

** U.S.-based DTCC (Depository Trust & Clearing Corporation) and London-based LCH.Clearnet said they planned to merge to form the world’s leading clearing house. LCH.Clearnet shareholders would receive total consideration of up to 739 million euros ($974.7 million), the majority of which would be funded through LCH.Clearnet’s revenue, the companies said in a media release.

** Vienna stock market operator Wiener Boerse agreed to buy a majority stake in the Prague Stock Exchange to boost its position in the emerging markets of central and Eastern Europe.

** CITIC Pacific Ltd said it was in preliminary talks to sell its motor vechicle and food distribution unit, Dah Chong Hong Holdings Ltd.

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