Softbank Group Corp has agreed to buy UK chip designer ARM Holdings PLC in a ￡24.3 billion (US$32.2 billion) deal, the two companies said yesterday, in an ambitious bet on mobile Internet that would transform the Japanese tech group.
ARM, the most valuable tech company listed in London by market value, is a major presence in mobile processing, with its processor and graphics technology used by Samsung Electronics Co, Huawei Technologies Co (華為) and Apple Inc in their in-house designed microchips.
The Cambridge-based group also stands to be central to the tech industry’s shift to the Internet of Things — a network of devices, vehicles and building sensors that collect and exchange data — a focus for Softbank founder Masayoshi Son.
Yesterday’s deal, Softbank’s largest to date, marks a departure for the Japanese group, whose tech and telecommunications portfolio ranges from US carrier Sprint to a stake in Chinese e-commerce giant Alibaba Group Holding Ltd (阿里巴巴) — but does not yet include a major presence in the semiconductor industry.
Under the all-cash, agreed offer, Softbank is to pay ￡17 for every ARM share — a premium of more than 40 percent to Friday’s close, in line with earlier news reports.
“This is one of the most important acquisitions we have ever made and I expect ARM to be a key pillar of Softbank’s growth strategy going forward,” Son said in the statement.
The acquisition is also one of Japan’s largest to date and is part of a trend of Japanese companies seeking growth abroad to compensate for a stagnant domestic economy. It would outrank even Softbank’s own US$22 billion acquisition of a controlling stake in wireless operator Sprint in 2013 — a deal that left the Japanese group with hefty debts as the US carrier’s losses mounted.
Softbank has raised about ￥2 trillion (US$19 billion) in cash over the last few months through asset disposals, according to Son — including the sale of shares in Alibaba, unusual for a group that has rarely exited investments.
However, analysts had expected it to use the cash to reduce debt or give shareholders a windfall by buying back its own shares.
Yesterday’s deal comes less than a month after Son, known as “Masa,” scrapped his plans to retire, effectively pushing out his heir apparent, former Google executive Nikesh Arora.
Son said then that he wanted to stay on to develop Sprint, but also to complete the transformation of Softbank into a tech investment powerhouse.
He has focused on what he calls the next “paradigm shift” in technology, which includes artificial intelligence and the Internet of Things — both increasingly important for ARM as it weathers a smartphone slowdown.
Earlier this year, ARM bought UK imaging specialist Apical, which specializes in technology to allow computers to analyze images — replicating human vision using software.
The deal would also come just weeks after Britain voted to leave the EU, a decision that has battered sterling and bolstered the yen.
Though it has warned on the staffing impact of Brexit, ARM Holdings’ revenues are largely in US dollars and it has a diverse portfolio of technologies it licenses. Its shares have climbed about 17 percent since the vote.
Under the offer yesterday, SoftBank said it was committed to keeping top managers, ARM’s headquarters and to at least double the employee headcount in Britain.
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