Lexar Bid is Inadequate
Below is a MRR and PLR article in category Finance -> subcategory Stock Market.
Lexar Bid Falls Short
Overview
Micron Technology's latest takeover bid for Lexar Media remains insufficient, despite a slight increase. Key shareholders, including billionaire investor Carl Icahn, are pushing back, suggesting Lexar is worth significantly more.
Bid Details
Lexar Media, a major player in flash media, received a revised all-stock exchange offer from Micron Technology, raising the bid to approximately $10 per share. This increase is marginal and doesn't meet shareholder expectations.
Shareholder Concerns
Major stakeholders, such as Elliott Associates, argue that the offer undervalues Lexar. They estimate Lexar's worth between $1.5 billion and $2.4 billion, far exceeding the revised offer of about $827 million.
Valuation Disparities
Micron's offer values Lexar at 1.10 times sales, while market leader SanDisk trades at 4.35 times sales. Adding complexity, Lexar has a pending $400 million patent infringement lawsuit against Toshiba, which it initially won but is now under appeal.
Financial Implications
If Lexar successfully secures the $400 million settlement, this would add approximately $4.83 per share in cash, in addition to the current $0.54 per share in free cash after debt. This means Micron's offer falls well below the true asset value.
Potential Competition
There are rumors that SanDisk may consider acquiring Lexar to enhance its market position. Given SanDisk's relationship with Toshiba, a takeover could lead to reduced settlement issues.
Conclusion
The special shareholder meeting rescheduled for June 16 will be crucial in assessing the bid. In my opinion, the $10 offer undervalues Lexar significantly. Will a better offer from a "white knight" emerge? Stay tuned.
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