SanDisk: Stifel Downgrades, Says It's No Longer Buying

Stifel’s Kevin Cassidy downgraded the rating for SanDisk Corporation SNDK from Buy to Hold, saying that there is potential downside in case the shareholders of Western Digital Corp WDC [Rated Buy] vote against the acquisition.

Analyst Kevin Cassidy mentioned that Alken Asset Management, a major shareholder, has presented “a reasonable argument” against the deal. Alken Asset Management has requested Western Digital to cancel the acquisition, citing changes in the NAND Flash market and company valuations. “We believe that Alken has valid concerns,” Cassidy wrote.

Western Digital appears committed to complete the SanDisk acquisition as per the previously stated terms of $67.50 per share in cash and 0.2387 shares of WDC, which is equivalent to ~$78.50 per share.

The analyst believes that the $78.50 per share price fully values SanDisk and represents a premium of around 8.5 percent over the current closing price. He said, however, that investors should not buy more SanDisk shares for this potential upside, considering “the potential downside if WDC shareholders vote against the acquisition.”