Nvidia’s $40 billion takeover of British chip designer Arm collapses

Deepak Gupta February 8, 2022
Updated 2022/02/08 at 4:41 PM

Nvidia’s $40 billion takeover of British chip designer Arm collapses

The British company aims to secure an IPO after the Japanese Soft Bank abandoned the sale

The takeover by Nvidia $40 billion (£29.6 billion) of the Arm based in Cambridge collapsed due to insurmountable regulatory hurdles, leaving the British chip designer to seek an IPO next year as an alternative.

The deal, which would have been the semiconductor industry’s largest, had become mired in bureaucracy on both sides of the Atlantic and in China and also faced fierce opposition from industry players since its announcement in September 2020.

The Softbank Japanese acquired arm — which has more than 500 customers using its chip designs, including Apple, Samsung and Google, in products ranging from iPads and cellphones to cars and smart TVs — for $32 billion in 2016.

In a joint statement, Softbank and Nvidia said they decided to terminate the agreement due to “significant regulatory difficulties preventing the completion of the transaction, despite the parties’ good faith efforts”.

The cash and stock deal was worth around $40 billion when it was announced 18 months ago, but has risen dramatically to $75 billion as the stock price of Nvidia soared.

Softbank quickly announced that it would revert to its backup plan of an initial public offering to cash in armand will receive a free $1.25 billion break from Nvidia.

The chip designer, which employs 6,500 people including 3,000 in the UK, also announced a management reshuffle with chief executive Simon Segars replaced by Rene Haas, head of the intellectual property unit. of Arm who previously worked at Nvidia for seven years, to run the listed company.

“Rene is the right leader to accelerate growth of Arm as the company seeks to re-enter the public markets,” said the CEO of Soft BankMasayoshi Son, in the release ofarm. “We will seize this opportunity and start preparing to go public arm, and to make even more progress. »

Nvidia said that despite the failed takeover, he would remain a close partner due to the strategic importance ofarm in the global chip industry.

arm is at the center of important computing momentum,” said Jensen Huang, founder and CEO of the California-based company Nvidia. “I expect thatarm either the architecture [d’unité de traitement informatique] most important of the next decade. »

The U.S. Federal Trade Commission has delivered a hammer blow to the prospect of a successful takeover, launching a lawsuit in December to block what it called an “illegal vertical merger” that would give Nvidia too much market power.

The UK last year ordered a full investigation into the deal, citing competition and national security concerns, while the EU and China also raised serious concerns.

Soft Bank said on Tuesday thatarm would prepare for an IPO before the end of the fiscal year to March 31, 2023. While no decision has been made on where to list the company, it is understood that the United States is favored as this generally results in higher valuations for technology stocks.

Many customers fromarm declared that the takeover by Nvidia would end its status as the Swiss of the semiconductor industry, with the US company able to control the technology and license chip designs to competitors.

In 2018, US-based Qualcomm dropped its two-year, $44 billion lawsuit against Dutch chipmaker NXP after it failed to win approval in China, the victim of a trade dispute between Beijing and Washington.

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