SoftBank’s $66bn sale of UK-based chip business Arm to Nvidia collapsed late on Monday after regulators in the US, UK and EU raised serious concerns about its effects on competition in the global semiconductor industry.
The deal, which would have been the largest ever in the chip sector, was set to give California-based Nvidia control of a company that makes technology at the heart of most of the world’s mobile devices. A handful of Big Tech companies that rely on Arm’s chip designs, including Qualcomm and Microsoft, had objected to the purchase.
SoftBank and Nvidia said they had agreed to scrap the deal because of “significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties”.
The Japanese technology group, which will receive a break-up fee of up to $1.25bn, said it would instead seek an initial public offering of Arm before the end of its next fiscal year in March 2023.
The deal’s failure brought an immediate management shake-up at Arm, with chief executive Simon Segars replaced by Rene Haas, head of the company’s intellectual property unit.
The collapse of the cash-and-stock transaction robbed SoftBank a windfall from a boom in Nvidia’s stock price. The deal was worth up to about $40bn when it was announced in September 2020 but increased as Nvidia’s shares took off.
In the UK, where politicians view Arm as a strategic national asset, attention is set to shift to whether the company will be listed in London. A British competition review into the deal was extended last year to include national security considerations.
However, people close to SoftBank said it would rather list Arm in New York and would resist nationalistic pressure. US markets accord higher valuations to tech stocks, even after a recent sell-off.
Haas said in an interview with the FT that no decisions had been made on where Arm would be listed or whether SoftBank would continue to hold a majority stake after the listing.
Nvidia had courted British politicians by claiming it was best placed to provide financial backing for Arm as it seeks to expand into new markets. Haas said the IPO would give Arm “the opportunity to raise some cash, which is always a good thing”.
Kirk Boodry, a tech analyst at Redex Holdings in Tokyo, said the “big question” was “whether SoftBank can surface the value it had hoped to receive from Nvidia” through the IPO.
Boodry added that the main issue was the impact the IPO had on any SoftBank share buybacks, “as the Arm sale looked to be the primary source of new funds”.
SoftBank’s shares closed 0.9 per cent lower on Tuesday at ¥5,302.
The technology conglomerate said on Tuesday it eked out a net profit of just over ¥29bn ($250mn) for the quarter ending in December after a sell-off in global tech stocks and a regulatory crackdown in China weighed on many of its Vision Fund companies. That compared with a net profit of ¥1.17tn ($10bn) for the same period the previous year.
Alibaba’s share price was also hit by speculation about potential SoftBank stake sales, with its Hong Kong-listed shares falling 2.5 per cent on Tuesday after a 6 per cent drop in the US on Monday. Alibaba is SoftBank’s most valuable asset.
Nvidia abandoned its pursuit of Arm at a board meeting on Monday, said a person familiar with the discussion.
Jensen Huang, Nvidia’s chief executive, hoped to use Arm’s processor designs to cement his company’s growing role in data centres, where its graphical processors have become important tools for machine learning.
However, some Big Tech companies that rely on Arm’s designs for their own chips argued that Nvidia would get an unfair advantage by having first rights to Arm’s technology.
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2022-02-08 07:26:55Z
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