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Nvidia buys ARM for $ 40 billion from SoftBank

The deal, announced on Sunday, will be funded through a mix of cash and shares, the companies said in a joint statement.

The move would allow it Nvidia (NVDA) – which primarily manufactures graphics processors for computer games and self-driving cars – to become an industry leader across multiple connected devices, including smartphones, PCs, robotics and 5G, CEO Jensen Huang wrote in a letter to employees on Sunday.
ARM designs the chips used by Apple (AAPL) and other major smartphone manufacturers. The company is headquartered in Cambridge and is known as one of Britain̵
7;s most successful technology companies.

Nvidia said on Sunday it plans to keep Arm’s Cambridge headquarters, as well as expand its campus with a new research facility.

“ARM’s business model is brilliant. We will keep its licensing model open and customer neutral, serving customers in any industry, around the world, and further expand the [intellectual property] license portfolio, “Huang wrote.

The deal is likely to be under significant scrutiny in the UK, where some politicians worry about preserving jobs at ARM. Nvidia’s rivals, who buy chip designs from ARM, are also likely to object.

The prime minister’s official spokesperson said on Monday that the British government would not hesitate to investigate any acquisitions that could have a major impact on the country.

Another asset sale for SoftBank

The deal comes four years after SoftBank bought ARM for $ 32 billion, marking the largest overseas acquisition by a Japanese company at the time.
SoftBank has been working to divest assets in recent months as the conglomerate seeks to raise money in response to the coronavirus pandemic. In March, it announced a plan to sell assets worth $ 41 billion, and last month it doubled with a partial sale of its stake in its Japanese mobile operator.
Shares of SoftBank in Tokyo were up nearly 9% on Monday following the news. The Financial Times also reported Monday that SoftBank is reconsidering a plan to privatize the company. SoftBank declined to comment on the report.

“The combination is likely to raise SoftBank’s share price in Tokyo,” Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, wrote in a note to clients.

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If the ARM deal goes through, it will be the largest deal ever made by the semiconductor industry, surpassing Avago’s 2015 acquisition of Broadcom, according to Dealogic.

Under the deal, Nvidia will pay out approximately $ 12 billion in cash and $ 21.5 billion in shares. SoftBank will receive a less than 10% stake in Nvidia, and the Japanese company will also be eligible for a payment of up to $ 5 billion if ARM meets “specific financial performance targets,” according to SoftBank. The company has not disclosed the objectives.

The deal is expected to close within 18 months. It will first have to pass regulatory approvals from the UK, the European Union, the US and China.

– Luke McGee and Charles Riley contributed to this report.

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