NVIDIA’s US$40bn (GBP29.6bn) takeover of Cambridge based ARM has collapsed due to insurmountable regulatory hurdles, leaving the British chip designer to seek a stock market flotation in the next year as an alternative, a UK media report said.
The Guardian reported the deal, which would have been the largest in the semiconductor industry, had become mired in red tape on both sides of the Atlantic and in China and had also faced fierce opposition from industry rivals since it was announced in September 2020.
The report noted Japan’s Softbank had acquired Arm, which has more than 500 customers using its chip designs, including Apple, Samsung and Google, in products ranging from iPads and mobile phones to cars and smart TVs, for $32bn in 2016.
In a joint statement cited by the paper, Softbank and Nvidia said they had decided to terminate the deal due to “significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties”.
The cash and stock deal was worth about $40bn when it was announced 18 months ago, but hads dramatically increased to as much as $75bn as Nvidia’s share price soared.
Softbank moved quickly to announce it was to revert to its backup plan of an initial public offering to cash in on Arm, and would receive a $1.25bn break-up fee from Nvidia.
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The chip designer, which employs 6,500 staff including 3,000 in the UK, also announced a management shake-up with the chief executive, Simon Segars, replaced by Rene Haas, head of Arm’s intellectual property unit who previously worked at Nvidia for seven years, to lead the publicly listed company, the Guardian said.
“Rene is the right leader to accelerate Arm’s growth as the company looks to re-enter the public markets,” the SoftBank chief executive, Masayoshi Son, said in the statement from Arm. “We will take this opportunity and start preparing to take Arm public, and to make even further progress.”
The report said the US Federal Trade Commission dealt a hammer blow to the prospect of successful takeover, launching legal action in December to block what it called an “illegal vertical merger” that would give Nvidia too much market power.
Last year, the UK ordered an in-depth investigation into the deal, citing competition and national security concerns, while the EU and China had also raised serious concerns, the Guardian said.
Many of Arm’s extensive client base had said takeover by Nvidia would end its status as the ‘Switzerland of the semiconductor industry’, with the US company able to control the technology and licensing of chip designs to rivals, the report added.