The media front this morning is flooded with multiple reports saying that Japanese Internet giant SoftBank has agreed to acquire UK-based technology company ARM Holdings Plc, known for making smartphone processors, for a staggering £23.4 billion(or about $31 billion). Scroll down to the bottom for updates and deal confirmation details.
SoftBank, an internet and telecommunications conglomerate based out of Japan, has been a heavy investor in online startups from India to China, while also owning mobile carriers in Japan and the U.S. (Sprint). However, rising debts has forced the company to rake in more cash and sell out stakes in some of its biggest invests, to tackle the financial crunch.
Big deals have included the sale of around $10 billion worth of shares in Chinese e-commerce giant Alibaba and the sale of its entire stake in Finnish game maker Supercell Oy to China’s Tencent Holdings Ltd.That deal valued Supercell at more than $10 billion, and is expected to bring in more than $7 billion for SoftBank.
The company is now betting big on one of the most influential technology companies on the planet, looking forward to become a leader in the upcoming tech market, full of connected devices and Internet of Things. This also comes amid all sorts of controversies and not-so-well performing businesses, in which Softbank has invested. Nikesh Arora’s exit and his investments during his tenure had raised questions on Softbank’s ability to invest intelligently, in sound businesses.
According to people close to the development, the all-cash deal could be announced as soon as Monday and will see SoftBank pay about a 43 per cent premium, as compared to ARM’s closing price last week. The Japanese company is bidding to pay about 17 pound per share for ARM’s outstanding shares.
The news of the takeover of the quarter-century old mobile chip-maker comes just weeks after UK’s exit from the European Union. The mention of Brexit is important here, considering that this reported ARM acquisition shuns the speculations, that UK will no longer be attractive market for tech investments. In fact, with the sudden fall in Pound’s value, UK is now being considered as an attractive destination for investments by overseas firms.
Two people who refrain from being named(via Bloomberg) say that the deal discussions were initiated by SoftBank and ARM was convinced enough to not run an auction process for its sale. But this bid by SoftBank could ignite a bidding war involving the most-potential acquirer — Intel. And if Intel jumps the gun to join the race, we could also see participation from Samsung or Apple for their chip business expansion.
Once completed, this would be the biggest deal completed by the Japanese Internet giant, even bigger than the $22 billion acquisition of a controlling stake in wireless operator Sprint in 2013. This is also the company’s first acquisition(or investment) since the abrupt departure of President Nikesh Arora, following the internal probe requested by the company’s shareholders. During his tenure at the tech giant, Arora had made serious bets in startups across Asia and United States, including Indian companies like Oyo Rooms, Ola, and Singaporean Grab.
While Son’s efforts has leap-frogged the Internet giant into becoming a formidable corporate group with an estimated market value of about $68 billion, but it has also contributed to huge debts amounting to over 11.9 trillion yen. Thus to tackle some of this ever-growing debt, the company has recently disinvested its stake in a couple of its most important deals, including Chinese retail giant Alibaba and game firm GungHo. SoftBank believes that this will add about 73 billion yen back to their war-chest.
UPDATE (ARM confirms acquisition):
Today, UK-based Arm Holdings Plc has confirmed that Japan’s Softbank Group has offered to pay £24.3 billion ($32 billion) to acquire the chip-designer. Both boards are on-board for the acquisition, but are now waiting to receive regulatory approval.
As reported by SoftBank, the Cambridge HQ-ed company will still continue to work as an independent entity post acquisition. Commenting on the agreement to acquire and add one of the biggest chip-makers to its global tech arsenal, Masayoshi Son, Chairman and CEO, Softbank, says that,
We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market-leader in its field. ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the “Internet of Things”.
This investment also marks our strong commitment to the UK and the competitive advantage provided by the deep pool of science and technology talent in Cambridge. As an integral part of the transaction, we intend to at least double the number of employees employed by ARM in the UK over the next five years.
While ARM is equally content with this deal, and partnership with SoftBank. Stuart Chambers, Chairman of ARM, adds that,
It is the view of the Board that this is a compelling offer for ARM Shareholders, which secures the delivery of future value today and in cash. The Board of ARM is reassured that ARM will remain a very significant UK business and will continue to play a key role in the development of new technology.
SoftBank has given assurances that it will invest considerably in the business, including doubling the UK headcount over the next five years and maintaining ARM’s unique culture and business model. ARM is an outstanding company with an exceptional track record of growth. The Board believes that by accessing all the resources that SoftBank has to offer, ARM will be able to further accelerate the use of ARM-based technology wherever computing happens.