1. Business
February 8, 2022

SoftBank to take Arm public as Nvidia deal finally collapses

SoftBank will bring chip design subsidiary Arm public following the collapse of its troubled acquisition deal with Nvidia.

By Giacomo Lee

Japanese giant SoftBank will take its UK-based chip design subsidiary Arm public following the collapse of its plan to sell the company to Nvidia.

The news of Nvidia dropping the $50bn mega-deal followed a weekend SEC filing by Alibaba which freed up the sale of its shares as owned by SoftBank. Verdict reported the filing as a signal of the Nvidia deal’s imminent collapse.

Announcing the termination, SoftBank said it will start preparations for a public offering of Arm within the fiscal year ending March 31, 2023. SoftBank shared a lacklustre earnings report for its 2021 third quarter (Q3) on Tuesday, while Arm CEO Simon Segars resigned and was replaced by Rene Haas, formerly president of Arm’s Intellectual Property Group.

Cambridge, UK-headquartered Arm, which licenses chip designs to companies across many industries, is valued at $32bn.

“The only surprise is that Nvidia didn’t sacrifice some $2bn to have already walked away from the deal,” senior GlobalData analyst Michael Orme tells Verdict. “When Softbank acquired Arm in 2016 the plan was to sink Arm profit into building out its capabilities beyond the smartphone.

“By 2020 when Softbank had to get shot of Arm the job was half done with the storied Apple M1 processor and the use of Arm technology in certain national supercomputing projects proving a point last year.”

Nvidia first announced the Arm deal in September 2020, when it expected to pay $40bn in a cash and stock deal. When Nvidia’s share price increased thereafter, the deal became worth more than $50bn.

Regulatory headaches over the deal came from all sides: the US Federal Trade Commission (FTC), the EU competition regulator, UK’s Competition and Markets Authority and China’s Ministry of Commerce and its State Administration for Market Regulation.

Opponents of the deal argued that ownership of Arm would give Nvidia an unfair advantage over its competitors. The collapse has cancelled a lucrative payday for SoftBank and CEO Masayoshi Son, one which the Japanese giant needs in light of its gloomy Q3 earnings report.

SoftBank net profit dropped to 29.05bn yen ($252.4bn) for the quarter ended Dec. 31 from Y1.172tn a year earlier. Many of its portfolio companies had dropped below their listing price during Q3, giving more urgency to a successful Arm float with interest from big bidders.

“Apple and Qualcomm clearly see Arm technology as a viable proposition for virtually any compute task provided the R&D can be funded and talent doesn’t follow CEO Simon Segars out of the door in Cambridge,” says Orme.

“Meanwhile, Qualcomm has made it clear that it will lead a consortium of strategic investors to support an IPO or a Private Equity arrangement.”

According to GlobalData, SoftBank Group Corp’s market cap stands at $80bn.