Shares Prices

On Friday, flash media maker Lexar Media (LEXR) received a higher revised takeover bid from Micron Technology (MU). The revised bid locations the all-stock exchange offer at around $10 a share, up marginally from the initial bid.

But major shareholders including billionaire investor Carl Icahn along with hedge funds and portfolio managers have deemed the initial bid to be inappropriate. Elliott Associates believes the initial bid “significantly undervalues Lexar,” and feels Lexar is worth between $1.5 billion and $2.4 billion. The estimate is well above the revised takeover bid of about $827 million.

I ought to concur and say the revised takeover bid is way as well low and requirements to be rejected by shareholders. Micron wants to pay close to 1.10x sales for Lexar although the marketplace leader SanDisk (SNDK) is trading at 4.35x sales. Lexar also has a $400 million patent infringement lawsuit against Toshiba that it had previously won but is now subject to an appeal by Toshiba.

Think about it this way, a successful $400 million settlement in favor of Lexar would equate to all-around $4.83 per share in extra money to add to the current $0.54 in totally free money following debt that Lexar has. This indicates Micron would pay less than $5 a share for Lexar’s assets, which can be lower.

There is also speculation that SanDisk is seriously thinking about taking a run at acquiring Lexar. This would make sense because SanDisk would solidify its leadership position.

Moreover, SanDisk has a close working relationship with Toshiba, which could see SanDisk drop or reduce the settlement if it managed to acquire Lexar.

Stay tune. A unique shareholder meeting to review the takeover bid has been moved to June 16. In my view, the $10 bid undervalues Lexar. Question is will a white knight surface?

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