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REVEALED: Fusion-io shopped itself to 11 firms... 10 declined

SEC filings from SanDisk slurp

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+Analysis Fusion-io shopped itself to 11 companies and only got one offer.

A Schedule 14D-9 SEC filing about the $1.1bn SanDisk acquisition of Fusion-io reveals that:

  • SanDisk and Fusion-io first discussed a possible commercial arrangement in Summer 2013. Fusion-io talked to other potential partners as well.
  • SanDisk expressed acquisition interest in October 2013 and Fusion-io employed Qatalyst as its financial advisor.
  • During the negotiating period, Fusion-io contacted 11 companies altogether. Five, including SanDisk, were interested enough to sign confidentiality agreements to get access to Fusion-io’s detailed financial and other data.
  • A sixth company, Party A, expressed interest.
  • One other company, Party F, said it was potentially interested in buying Fusion-io but “given internal corporate changes, the company is not in position to continue discussions regarding a potential transaction but would be in position to begin so in early March 2014, at the earliest.”
  • In May 2014 both Party A and Party F declined to make offers.
  • Lance Smith, Fusion’s COO will become an SVP and general manager of SanDis on $425,000/year plus stock options and bonus.
  • Fusion CEO Shane Robison could get $1.92m for the more than 170,000 Fusion shares he owned. It would appear he will not be employed by SanDisk.
  • Robison gets $5.02m as golden parachute compensation. Smith will receive $5.6m. Golden parachutes apply when the employee gets their job terminated and are known as severance packages.
  • Two Fusion board members, Forest Basket and Scott Sandell, could get almost $80m apiece for the shares in which they have a pecuniary interest.
  • Qatalyst Partners’ fee is $23m.

Chris says:

Who were the 10 companies approached by Fusion-io? We would guess the list included Cisco, Dell, EMC, HDS, HP, IBM, NetApp, Seagate, and Western Digital, leaving one other apart from SanDisk. It might have been Toshiba, which has/had a PCIe interest with Violin Memory.

Seagate, of course, bought the LSI flash card business from Avago for $450m in May 2014, less than half the buy price of Fusion-io.

It was very lucky for Fusion-io that SanDisk was interested.

Fusion-io’s board appeared to have concerns about risks to its business if Fusion remained independent, including the “potential volatility of cost and availability of NAND flash …the fact that some of the Fusion-io's competitors have vertically integrated product portfolios [and] substantially greater resources.”

There was also the “recent consolidation in the industry in which Fusion-io operates and the impact of this competitive environment on Fusion-io's ability to price its products and retain and expand its portion of the total available market.”

In the event, the board appeared to have looked at the prospects of staying independent, shuddered, and fled into the arms of SanDisk. ®

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