Susquehanna: SanDisk-Western Digital Deal Will Happen, Sees Buying Opportunity At Current Prices

• Shares of SanDisk Corporation SNDK declined 16.5 percent over the past three months, hitting $61.74 on January 25.
• Susquehanna’s Mehdi Hosseini upgraded the rating on the company from Neutral to Positive, with a price target of $86.50.
• Hosseini believes the pullback in the stock offers an attractive long-term investment opportunity, especially given the increased confidence the deal with Western Digital Corp WDC would close.

Analyst Mehdi Hosseini believes the SanDisk-Western Digital deal was like to occur, “irrespective of whether the WDC/Unis deal closes in time or not.”

Hosseini noted that even if the WDC/Unis deal did not close, “a WDC deal for SNDK would value SNDK shares at a minimum of ~$78/share based on current WDC share price.”

Related Link: Why Is Sandisk Trading So Far Off Its Western Digital Merger Price?

In fact, if the SanDisk deal requires voting by Western Digital’s shareholders, Hosseini believes that the shareholders would vote in favor of the deal, given the deal’s strategic/financial rationale and the softening HDD industry environment, which is likely to raise investor concerns regarding HDD exposure if the SanDisk deal falls through.

Following a strong December quarter and a better than feared March quarter guidance, Western Digital’s shareholders are likely to be less concerned regarding competition in the NAND industry.

In addition, with the antitrust approvals now in the past, with the HSR having expired and the regulatory bodies in Japan and Singapore having approved the deal, the SanDisk acquisition appears to be “a step closer to completion.”

Also, “WDC/SNDK pulled forward their anticipated deal closing to 2Q16 (from 3Q16),” which Hosseini views as “another reassuring sign.”