Why Is SanDisk Trading So Far Off Its Western Digital Merger Price?

Back in October, Western Digital Corp (NASDAQ: WDC) announced an acquisition of SanDisk Corporation (NASDAQ: SNDK) in a cash and stock deal valued at about $19 billion. Only about three months later, SanDisk’s stock is trading at $67.42, 28 percent below the original buyout price.

According to Sterne Agee CRT analyst Rob Cihara, there are a number of reasons for such a large spread, including both company-specific and general market concerns.

Cihara cites weakness in the overall stock market as one big reason for SanDisk’s falling stock. “Add to this weaker HDD market demand, weaker memory markets and stress in the market for high-yield debt,” he explains.

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However, Cihara estimates that, while the stock is currently in a rut, SanDisk would currently be trading in the $35-$49 range if the buyout had not been announced.

Despite the decline, Sterne Agee has a Buy rating on Western Digital and a Neutral rating on SanDisk.

Disclosure: the author holds no position in the stocks mentioned.