Facing regulatory roadblocks, SoftBank drops sale of Arm to Nvidia, will seek IPO

(Feb 8): SoftBank Group Corp shelved the sale of Arm Ltd to US chipmaker Nvidia Corp due to regulatory hurdles, the companies said, marking the collapse of what would have been a record deal for the industry valued at as much as US$80 billion (about RM334.96 billion).

Arm named a new chief executive officer (CEO) on Tuesday (Feb 8) who it said would help the British firm seek a public listing before March 2023.

The cash-and-stock deal was announced in 2020, but the US Federal Trade Commission sued to block it in December, arguing that competition in the nascent markets for chips in self-driving cars and a new category of networking chips could be hurt if Nvidia carries out the purchase.

The buyout also faced scrutiny in Britain and the European Union amid concerns that it could push up prices and reduce choice and innovation. It had yet to receive approval in China, which previously withheld approval of cross-border chip acquisitions.

The sale would have marked an early exit from Arm for SoftBank, which acquired it in 2016 for US$32 billion, and the collapse of the deal marks a major setback to the Japanese conglomerate's efforts to generate funds at time when valuations across its portfolio are under pressure.

Arm said in a separate statement that it had appointed Rene Haas to replace Simon Segars as its CEO and a member of the board, effective immediately. A chip industry veteran, Haas joined Arm in 2013 and before that worked seven years at Nvidia.

"We are excited about the opportunity to be a publicly listed company again," said Haas in an interview with Reuters.

The newly appointed CEO declined to state where the company plans to go public.

SoftBank said that Arm's net sales surged 40% to US$2 billion in the nine months to December from the year-ago period.

An Arm acquisition would have put Nvidia into even more intense competition with rivals in the data centre chip market such as Intel and Advanced Micro Devices Inc .

Arm licenses its architecture and technology to customers such as Qualcomm Inc, Apple and Samsung Electronics Co Ltd that design chips for devices from mobile phones to computers.

Nvidia has become the most valuable US chip company on the strength of its graphic processor chips. Although still seen as crucial for gaming, graphic processors have become much more widely used for artificial intelligence and other advanced fields.

The value of the deal, which depended on Nvidia's stock price, was originally pegged at about US$40 billion and rose with Nvidia's stock price to about US$80 billion late last year, though the California company's stock has fallen since.

Nvidia said in a statement that it would retain its 20-year Arm licence.

The Financial Times was the first to report that SoftBank's Arm-Nvidia deal had collapsed. Reuters later confirmed the news.

The Japanese investment giant said it would recognise as profit in the fourth quarter a US$1.25 billion break-up fee that Nvidia deposited.

The collapse of the deal underscores again the difficulty that companies face in convincing antitrust regulators and governments to green-light large tech deals, especially in the semiconductor industry.

Last week, a US$5 billion deal between Taiwan's GlobalWafers and German chip supplier Siltronic fell apart after German regulators failed to approve it on time.

Among other examples, in 2018, Qualcomm walked away from a US$44 billion deal to buy NXP Semiconductors after failing to secure Chinese regulatory approval, while former US president Donald Trump blocked microchip maker Broadcom's proposed takeover of Qualcomm.

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