New York - SanDisk agreed to buy the long-speculated takeover target Fusion-io for about $1.1 billion, gaining the provider of flash memory for Facebook and Apple that counts Steve Wozniak as its chief scientist.
The all-cash offer is for $11.25 a share -- 21 percent higher than Fusion-io’s closing price on June 13 -- and the deal has been approved by the boards, the companies said today in a statement.
Fusion-io’s shares rose above the offer price in New York trading, signaling investors may anticipate a counter-bid.
The purchase gives SanDisk, a maker of flash memory for mobile devices, a stronger hand in data centres.
Fusion-io has repeatedly been the subject of takeover speculation dating back at least to a Goldman Sachs report four months after the company’s initial public offering in 2011 for $19 a share.
SanDisk is “getting a really good price,” Richard Kugele, an analyst at Needham in New York, said today in an interview.
Looking at the deal, “the only thing that’s surprising about it was the multiple wasn’t higher.”
Fusion-io jumped 22 percent to $11.37 at 9:47 a.m. New York time and earlier rose as high as $11.46 for the biggest intraday gain since September 2013.
SanDisk, based in Milpitas, California, rose 2.5 percent to $100.90.
Apple, Facebook
Founded in 2005, Fusion-io combines software and memory chips to speed the rate that server computers can access data.
Wozniak was a co-founder of Apple in 1976.
Annual sales of the types of data-storage devices that Salt Lake City-based Fusion-io makes may reach $7 billion by 2017, according to industry researcher IDC.
Flash-storage technology is faster and more efficient than traditional spinning disks, making it useful for Fusion-io customers Apple and Facebook whose data centres are constantly processing large amounts of information.
“People who are going to dominate the flash base, are going to be broader sweep, full-service companies,” Kugele said.
“Fusion just didn’t have the scale of those guys.”
SanDisk will fund the acquisition with cash available on its balance sheet.
Under chief executive Sanjay Mehrotra, SanDisk has been boosting earnings by selling more chips to makers of mobile devices and focusing on faster solid-state drives, which have a higher average price than memory sticks and cards.
“Fusion-io will accelerate our efforts to enable the flash-transformed data centre, helping companies better manage increasingly heavy data workloads at a lower total cost of ownership,” Mehrotra said in today’s statement.
The transaction is expected to be completed by the third quarter of SanDisk’s fiscal 2014 and boost SanDisk’s earnings, excluding some items, in the second half of its fiscal 2015.
The company’s shares have jumped 40 percent this year through June 13.
Goldman Sachs advised SanDisk on the deal while Skadden, Arps, Slate, Meagher & Flom LLP provided legal counsel.
Qatalyst Partners acted as financial adviser to Fusion-io and Wilson Sonsini Goodrich & Rosati provided legal counsel. - Bloomberg News