Needham Upgrades SanDisk To Buy, Says Western Digital Deal 'Likely'

• SanDisk Corporation SNDK shares have appreciated 16.46 percent over the past six months, although they declined to a low of $46.11 on August 25.
• Needham’s Rajvindra S. Gill has upgraded the rating on the company from Hold to Buy, with a price target of $78.
• The upgrade in the rating is based on the likelihood of the deal with Western Digital Corp WDC closing successfully having increased to more than 90 percent.

Analyst Rajvinder Gill mentioned that Needham’s IT Hardware analyst had reported that Western Digital was upbeat regarding closing the deal in 2Q16 and receiving shareholder approval, regardless of whether the Unis deal comes through.

“Recall there are two scenarios relating to the deal: 1) ~$86 per share if the Unis investment in WDC is approved; 2) if not approved (or terminated), WDC would pay $67.50 in cash plus 0.2387 shares, or ~$78 at current levels,” Gill elaborated.

At SanDisk’s current share price, the spread is 30 percent between the first scenario and 18 percent for the second scenario.

Gill went on to state that “with WDC accelerating the timeline for completing the deal and the wide spread, we would be buyers,” while estimating that SanDisk would receive $85.89 in total value, at the current levels, if the Unis deal is approved, while getting $78.21 if the Unis deal falls through.