Japan’s SoftBank Group said Monday it is selling British chip designer Arm to US chip company NVIDIA for up to $40 billion, potentially creating a new giant in the industry.
If approved, the deal will be one of the largest acquisitions anywhere in the world this year, and will propel NVIDIA to the forefront of the semiconductor sector.
The announcement also renewed speculation about SoftBank Group’s future, with Bloomberg News reporting it is set to revive talks about going private via a management buyout plan.
The Arm sale is valued at up to $40 billion and is subject to approval by authorities in several jurisdictions, including Britain, China, the United States and European Union, SoftBank Group said.
It hopes the deal will be completed by around March 2022, it added in a statement.
SoftBank Group shares soared in early morning trade in Tokyo, rising by almost 10 percent before settling slightly, up 7.78 percent to 6,316.0 yen around 30 minutes into the day.
Founded in 1990 in the United Kingdom, Arm specialises in microprocessors, and dominates the global smartphone market. But its chips are also found in countless sensors, smart devices and cloud services.
NVIDIA, well known for graphics cards that are favoured in the video game industry, has seen sales skyrocket during the coronavirus crisis, with gaming a popular past-time in lockdown.
Its products are also increasingly used for artificial intelligence and in data centres.
SoftBank bought Arm in 2016 for $32 billion in a deal that left investors cold and saw the conglomerate’s stock plunge sharply.
Analysts at the time said SoftBank had paid too much for the firm and the purchase revived concerns about the Japanese company’s balance sheet.
NVIDIA said in a statement that under the deal it will pay SoftBank $21.5 billion in common stock and $12 billion in case, $2 billion of which will be payable at signing.
SoftBank may receive up to another $5 billion in cash or stock, dependent on Arm’s performance.
And NVIDIA will also issue $1.5 billion in equity to Arm employees, for a deal worth a total of up to $40 billion.
SoftBank said it felt Arm would perform better in combination with NVIDIA and the sale would “contribute to an increase in our company’s value for shareholders”.
It said the deal would give it a combined total of 6.7-8.1 percent in NVIDIA’s outstanding shares, but insisted that would not make the US firm a subsidiary or affiliate.
“Our belief in the power of Arm’s technology and its potential remains unchanged, and we, as a strategic major shareholder in NVIDIA, will be committed to Arm’s long-term success,” SoftBank added.
NVIDIA said the acquisition would help “create the premier computing company for the age of artificial intelligence”.
It said Arm would retain its name and remain in Cambridge in the UK, where a new global centre for excellence in AI will be set up.
The sale, which comes as SoftBank engages in a massive push to boost its cash reserves, renewed speculation about the firm’s future plans.
Bloomberg News, citing unnamed people familiar with the matter, said senior SoftBank executives planned to revisit a management buyout, which had previously met with internal opposition.
The report said the discussions were at an early stage and might not result in the firm going private, but reflected pressure from those who feel SoftBank would be subject to less scrutiny if it were not publicly listed.
SoftBank chief Masayoshi Son has made no secret of his frustration with varied criticism of his investment strategy, from his dogged commitment to floundering start-up WeWork to recent derivative trading that spooked investors.