Softbank Group Corp yesterday confirmed that the US$40 billion sale of chip business Arm Ltd to Nvidia Corp had collapsed because of “significant regulatory challenges” over concerns about competitiveness and said that it planned to now take the unit public.
The decision comes after US authorities filed a lawsuit seeking to block the sale, and probes were launched into the deal in the UK and Europe.
Alongside the announcement, the firm reported a net profit of ￥29 billion (US$251 million) in the fourth quarter of last year.
Photo: Reuters
That marked a sharp drop from the ￥1.17 trillion profit logged in the same period in the previous financial year, when results were boosted by huge technology share rallies.
With a focus on debt to drive growth, technology firms of the kind Softbank chief executive Masayoshi Son has heavily invested in have taken a beating on the expectation of higher US interest rates.
Those routs led to Softbank’s first quarterly net loss for 18 months during the previous three months.
There have also been challenges elsewhere for Softbank, including losses on Chinese ride-hailing giant Didi Global Inc (滴滴), which has been hit by Beijing’s regulatory crackdown.
Didi has been forced to delist from the New York Stock Exchange and reported a US$4.7 billion net loss in the fourth quarter last year.
Shares of Alibaba Group Holding Ltd (阿里巴巴), which is Softbank’s biggest single investment, have also tumbled and reports have suggested that Son might be considering the sale of some of the stake in the firm.
Ace Research Institute senior analyst Hideki Yasuda said that the slump in Alibaba shares was particularly damaging for Son, whose strategy of targeting technology firms and start-ups in search of unicorns has been controversial and led to an earnings roller coaster.
Son in November last year announced a ￥1 trillion share buyback, reportedly under pressure from shareholders frustrated by Softbank’s sinking share price, but it might now find itself with less cash on hand than anticipated, with analysts predicting that an Arm initial public offering — which Softbank said it wanted by March next year — would bring in less than the planned sale.
Nvidia is one of the world’s largest and most valuable computing companies, while Arm creates and licenses microprocessor designs and architectures.
Softbank had announced the deal in 2020, when it was valued at US$40 billion, though the sum would have been higher now thanks to a rise in Nvidia’s share price.
The Financial Times, which reported the deal’s collapse yesterday, said that Softbank was expected to seek to list Arm in the US, but that could face opposition in the UK.
Softbank said its consolidated net profit for the nine months to December last year plunged 87 percent year-on-year to ￥392.6 billion.
The company has also seen internal turbulence, with chief operating officer Marcelo Claure leaving last month, following reports that his demands for as much as US$1 billion in compensation had fueled an internal clash.
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