SanDisk gets early boost; Micron, Intel active on sector's deals; AMD wraps up tender

By Kenneth Lim

Boston, Aug. 23 - SanDisk Corp. gained slightly on Monday as the convertible market ended mixed amid an uneven day for equities.

Tech names got a weak boost early in the day after Hewlett-Packard Co. bid for data storage company 3Par, Inc., although the sector struggled later in the session.

Transocean Ltd. remained an actively traded name, slipping on Monday amid ongoing investigations into the rig explosion and leaking oil well in the Gulf of Mexico.

The market in general had a slow session coming out of the weekend with stocks languishing amid weak economic data, a sellside convertible trader said.

"Pretty quiet day for us," the trader said. "We're facing a lot of uncertainty in the markets right now, and that's causing some reluctance among investors. It's also a Monday, so things tend to be a little quieter."

Some month-end activity could build up over the next few days, the trader added.

"We could see some month-end window dressing this week," the trader said.

SanDisk adds

SanDisk's new 1.5% convertible due 2017 was one of the most heavily traded names on Monday, adding half a point as the common stock rose briefly in the morning.

The notes, which priced at par, traded at 99.25 versus a common stock price of $41.70 on Monday. The common shares closed at $40.73, lower on the day by 77 cents, or 1.86%.

"SanDisk was up this morning; the stock did better with the sector," the trader said.

The notes priced after the close Thursday with an initial conversion premium of 25%.

The $1 billion registered deal had a greenshoe for an additional $150 million.

Morgan Stanley & Co. Inc. and Goldman Sachs & Co. were the joint bookrunners.

SanDisk is a Milpitas, Calif.-based flash storage company.

The convertibles were unchanged on a dollar-neutral basis, and the small outright improvement on Monday was mostly a function of a better stock price.

"It's the stock," the trader said. "I don't think the market likes the issue better today than on Friday."

The trader noted that the deal suffered on its secondary market debut because SanDisk stock slipped on Friday.

"It was an OK issue. I think they had some bad luck because the stock took a beating on Friday, but I don't think they priced it badly," the trader said. "They priced it just a little bit cheap, which was reasonable. It will go back up when the stock market is better."

Tech sees M&A interest

The tech sector in general was buoyed early Monday after Hewlett-Packard outbid rival Dell Inc. with a $24.00 per share cash offer for 3Par in a bid worth $1.6 billion.

Palo Alto, Calif.-based Hewlett-Packard and Round Rock, Texas-based Dell are computer and electronics manufacturers. 3Par is a Fremont, Calif.-based data storage company.

Dell had offered $18.00 per share for 3Par.

"Tech names did a bit better in the morning because of the HPQ offer, and people are thinking, what's next?" the trader said.

SanDisk's Boise, Idaho-based rival, Micron Technology, Inc., saw its 1.875% convertible due 2014 add a point to change hands at 89.5 versus a common stock of $7.40. The shares rose 3.65%, or 26 cents, to close at $7.38.

"Micron was up today, did pretty well," the trader said. "Some people have been optimistic about the name, but I haven't seen anything specific today."

Intel Corp.'s 2.95% convertible due 2035 slipped half a point to 98.5 against an $18.75 stock price. The common stock closed Monday at $18.70, lower by 1.11% or 21 cents.

Intel was in some merger-and-acquisition news of its own the week before, when the company said it was buying Santa Clara, Calif.-based security technology company McAfee, Inc. for $7.68 billion in cash.

Intel is a Santa Clara, Calif.-based chipmaker.

Investors eye possible deals

The 3Par bids and Intel-McAfee deal have sparked speculation interest in the tech sector for other possible merger-and-acquisition type opportunities, a convertible analyst said.

"It's a pretty good time for consolidation in the sector," the analyst said. "A lot of companies are cash rich, and over the past couple of months a lot of stocks have become depressed. So there are a lot of potential buyers and a lot of potentially cheap targets."

But the analyst said expectations of possible M&A activity should not affect prices much.

"Unless you're like a big, active investor like a Warren Buffett or a Carl Icahn, most investors don't invest because they think a company could be a takeover target, because there's no way for you to really know, right?" the analyst said. "You could say something's a possible takeover target because it's a good company and its stock is cheap, but that's just saying it's a good bargain, and you should be buying it whether it's going to be taken over or not."

AMD completes tender

Advanced Micro Devices, Inc.'s 6% convertibles due 2015 slipped a quarter-point to 98.875 versus a common stock price of $6.15 on Monday as the company wrapped up an $800 million tender offer for the notes.

Common shares of the Sunnyvale, Calif.-based chipmaker eased 1.76%, or 11 cents, to close at $6.14 on Monday.

AMD said Monday that it received about $1.529 billion in tenders to sell the notes back to the company at par. There are $780.13 million principal amount of notes outstanding after the tender.

The analyst said the remaining AMD notes that have not been bought back could hover close to par because of expectations that the company wants to replace that debt.

"The coupon is pretty expensive from the company's viewpoint," the analyst said. "If they can get something cheaper, I think they'll try to essentially refinance this, which is what they've been doing."

Transocean wavers on hearings

Transocean's 1.5% series A convertible due 2037 declined by 1 point outright to 94.625 on Monday as the stock retreated by 0.25%, or 13 cents, to a $50.87 close.

The convertibles and the stock have been under pressure over the past month due to concerns about ongoing investigations into the oil rig explosion in the Gulf in April.

"The story hasn't changed," a sellside trader said. "The only thing is that the focus of the people looking at this issue has shifted from stopping the leak to locating the blame. I think if there's any nervousness it's going to be because of the potential for negative headlines as everyone starts pointing their finger at somebody else."

Mentioned in this article:

3Par, Inc. NYSE: PAR

Advanced Micro Devices, Inc. NYSE: AMD

Dell Inc. Nasdaq: DELL

Hewlett-Packard Co. NYSE: HPQ

Intel Corp. Nasdaq: INTC

McAfee, Inc. NYSE: MFE

Micron Technology, Inc. Nasdaq: MU

SanDisk Corp. Nasdaq: SNDK

Transocean Ltd. NYSE: RIG

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