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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: joncon63 who wrote (59895)	2/18/2016 1:05:13 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Would Chinese interests in acquiring SNDK technology be fulfilled if they declined to provide $4 billion funding before the merger with WDC and waited until after the merger took place? This is a key question, and the answer, I think, goes to the amount of control WDC has without the benefit of Chinese funds beforehand. If WDC doesn't get the $4 billion from Chinese interests, it then buys SNDK at a price of approximately $67 per share and retains ownership of the entire asset. If Chinese interests then begin buying WDC stock, counting assets of both WDC and SNDK, the price is likely to be higher. Put another way, the $4 billion to be provided by Chinese interests will buy less of the combined WDC and SNDK than it would buy beforehand. The $4 billion buys WDC stock equal to about 15% of the company, prior to the completion of the merger. And Chinese interests will probably also acquire seats on the WDC board of directors. Afterwards, the investment will buy either 15% of the company, but with a lower book value per share, subtracting the additional debt to be used by WDC to buy SNDK. Or, if the debt is in the form of convertible bonds, the $4 billion will result in a lower percentage than 15% of the fully diluted shares. As I've noted previously, I think the whole idea of Chinese interests in this deal is to enable them to acquire a technology they don't have (mainly the SNDK technology for non-volatile memory). They may want to build a fab in China to produce flash memory, eventually replacing the share of SNDK production in Japan from the SanDisk - Toshiba joint venture there. China is meeting some resistance as it tries to acquire essential technology. Their unsuccessful attempt to buy Micron is an example. In this case, they want to acquire the technology through a minority position in a U.S. company, rather than attempting to buy either SNDK or WDC outright, which surely might raise eyebrows at the Committee on Foreign Investments in the U.S. (CFIUS). Because the strategy of buying a minority interest in a U.S. company that is set to buy SNDK, I think the deal will pass muster, and the end result will lead to WDC paying the full $86.50 per share for SNDK. Art