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Technology Stocks : WDC/Sandisk Corporation

WDC 163.33

+3.5%

Nov 28 9:30 AM EST

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To: Ausdauer who wrote (11787)	6/4/2000 1:52:00 PM
From: Bargain Hunter	Read Replies (2) of 60323

Nobody has adequately explained why Seagate would want out of SanDisk "at any cost" given SanDisk's prospects. Aus, I touched upon the subject in an earlier message: Message 13815092 If you read the SEG filings related to the Veritas deal you will learn the following: 1) Any SNDK shares still owned at the closing will pass to VRTS. VRTS will issue extra shares of VRTS to SEG shareholders using an agreed formula related to the SNDK share price at the time. 2) SEG managers are not treated like regular SEG shareholders. They are trading their SEG shares and options for part of the newly private company and do not receive the VRTS shares and cash that other shareholders receive. 3) The newly private disk drive company will receive a fixed amount of cash as part of the transaction. Presumably SEG management will need to spend cash on the business in the future. Since they are guaranteed a fixed amount of cash, any amount that they can spend before the closing while still making it look like "normal" spending, is essentially free to them: it comes out of the amount to be received by the rest of the SEG shareholders. They can raise cash by selling shares from the investment portfolio. It doesn't hurt them at all if the price of SNDK gets trashed in the process because, again, the cost is born by SEG shareholders. Would it be overly cynical to believe that they are using these aspects of the deal to their advantage? Or overly naive to dismiss it? If I owned SEG shares I would want to look very carefully at all significant uses of cash since the deal was announced. In particular, do the recently announced plant closings require spending a lot of cash that will be paid before the deal closes?

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