Samsung Electronics, the world's top memory chip maker, withdrew a $5.9 billion unsolicited bid for flash memory card maker SanDisk Corp, citing the US company's deepening losses and uncertain outlook.
Makers of memory chips are bracing for another round of heavy quarterly losses as a downturn in the industry shows no signs of letting up.
Markets had been doubtful of a deal between Samsung and SanDisk, given that the spread between Samsung's offer price and SanDisk's trading price was 80 per cent, according to Reuters data.
"Your surprise announcements of a quarter billion dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organisation 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 today.
"As a result of these developments, we are no longer interested in acquiring SanDisk at $26/share."
SanDisk said its board had remained open to a deal that "recognises SanDisk's long-term value" but added Samsung had never contacted it after an exchange of letters in September.
SanDisk had rejected Samsung's bid last month saying the offer failed to price in the "intrinsic" value of its intellectual property.
Jim Handy at Objective Analysis said in a note: "Today's announcement should help Samsung push SanDisk's share price lower, making it possible to acquire the company at a better deal."
Buying SanDisk would have given Samsung advanced technology and a tighter grip on its market dominance as smaller rival Toshiba is challenging its position.
SanDisk shares fell 6.1 per cent in early German trade. Samsung, South Korea's top company worth $55 billion, ended down 2.1 per cent, still outperforming a 5.1 per cent drop in the wider Seoul market.
SanDisk's shares have dived 55 per cent this year and closed at $14.76 in US trade last night.
Reuters