Toshiba boosts SanDisk as Samsung circles

By Mayumi Negishi

TOKYO (Reuters) - Japan's Toshiba Corp is buying $1 billion (583 million pounds) worth of equipment from joint venture partner SanDisk Corp, shoring up the California-based company as it faces a takeover bid from South Korean rival Samsung.

SanDisk shares have halved in value this year in the face of a worldwide glut in chips, and some analysts said the deal with Toshiba could reverse some of the losses, helping it fend off Samsung Electronics Co Ltd, the world's No. 1 memory chip maker.

SanDisk, the biggest U.S. maker of flash memory cards, holds key patents in such memory, but a rating downgrade by Standard & Poor's in July is raising financing costs, and the sliding market is expected to cause it to announce a sharp drop in quarterly earnings on Monday.

Toshiba, the world's No. 2 NAND maker, was likely to take on about $550 million of SanDisk's $1 billion lease obligation and pay roughly $400 million to $500 million in cash, one financial source said.

NAND flash memory are used in cell phones, digital cameras and MP3 players.

"From SanDisk's point of view, this is a new cash inflow to keep it going. It could extend Samsung's battle for SanDisk for some time," said Park Hyun, an analyst at Prudential Securities.

SanDisk has twice rejected an offer of $26 per share from Samsung, well above its current share price of $15.51.

Toshiba plans to buy about 30 percent of the equipment at a Japanese joint venture with SanDisk that makes NAND flash memory.