Flash media maker Lexar Media (LEXR) got a higher bid from Micron Technology to buy it on Friday (MU). The all-stock exchange offer is now around $10 per share, which is a small increase from the first bid.
But big shareholders, like Carl Icahn, a billionaire investor, and hedge funds and portfolio managers have said that the first offer wasn't good enough. Elliott Associates thinks that the first bid "significantly undervalues Lexar" and that Lexar is worth between $1.5 billion and $2.4 billion. The estimate is much higher than the revised takeover offer, which was about $827 million.
I have to agree with you that the new takeover offer is way too low and that shareholders should vote against it. Micron wants to pay about 1.10x sales for Lexar, while market leader SanDisk (SNDK) is trading at 4.35x sales. Lexar is also suing Toshiba for infringing on a patent. It has already won the case, which is worth $400 million, but Toshiba is now trying to get the case thrown out.
If you look at it this way, a successful $400 million settlement in favour of Lexar would add about $4.83 per share to the $0.54 per share that Lexar already has after paying off its debts. This means that Micron would buy Lexar's assets for less than $5 per share, which is low.
Some people also think that SanDisk is seriously considering making an offer to buy Lexar. This would make sense, since SanDisk would strengthen its position as the market leader.
Also, SanDisk works closely with Toshiba, which could mean that if it bought Lexar, SanDisk would drop or reduce the settlement.
Stay tune. The new date for the special meeting of shareholders to discuss the takeover bid is June 16. I think that the $10 bid is too low for Lexar. The question is whether a "white knight" will show up.
