Nvidia’s Plan to Acquire Arm from SoftBank Collapses

SoftBank, owner of Arm, announced today that it has terminated NVIDIA's acquisition of Arm. NVIDIA shares rose slightly in premarket trading.

The termination of NVIDIA's acquisition of British tech company Arm was confirmed today by Arm's owner Japanese investment bank SoftBank.

The $40 billion deal was announced back in September 2020, but immediately faced a number of barriers to approval by global regulators.

The US Federal Trade Commission (FTC) has launched a lawsuit, the authorities of the UK, EU, and China have expressed concern about the future consequences of the deal.

At the end of January, insiders reported on the termination of the deal and SoftBank's plans to bring Arm to the public market.

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In a press release today, the bank confirmed these plans, citing “serious regulatory issues preventing the deal from being completed despite the good faith efforts of the parties.”

Arm will now begin preparations for a public offering during the fiscal year ending March 31, 2023.

Arm CEO Simon Segars stepped down and was immediately replaced by René Haas.

"Rene is a suitable leader to accelerate Arm's growth as the company begins to prepare to re-enter the public markets," said Masayoshi Son, CEO of SoftBank Group.

Under the terms of the agreement between NVIDIA and SoftBank, the bank will retain the $1.25 billion deposit it received at the time the deal was signed. The amount will be recognized as SoftBank's income in the fourth quarter of the fiscal year ending March 31, 2022.

Jensen Huang, founder and CEO of NVIDIA, commented on the collapse of the deal: "Arm has a great future and we will continue to support them as proud licensees for decades to come."

“Arm is at the center of an important computing dynamic. Although we will not be one company, we will work closely with Arm. The significant investment made by Masa has enabled Arm to expand the capabilities of the Arm CPU beyond client computing to supercomputing, cloud computing, artificial intelligence, and robotics. I expect Arm to be the most important CPU architecture in the next decade."

In the article “ Insiders Say Nvidia Prepares to Pull Back on Arm Purchase,” AtoZ Markets learned that a majority of Wall Street analysts agree that the termination of the deal will not cause Nvidia significant harm or a downgrade in stock valuation.

"While Nvidia's ownership of Arm might be great, we don't believe it's feasible," Bernstein analyst Stacey Rasgon wrote on Monday. “In our view, the deal was to help create and develop a broader ecosystem for Arm, especially in data centers. Presumably, Nvidia can and will continue its stand-alone efforts here, although perhaps such efforts could be accelerated through ownership of the asset."

Shares of Nvidia, down 15.9% since the start of 2022, were up 1.68% on Monday. Shares continued up 1.7% in premarket trading today.

Shares in a number of semiconductor stocks posted sharp gains last week, which seems to be a bullish signal for the sector as a whole. On Friday, chip makers Power Integrations, Synaptics, Microchip Technology, and Skyworks Solutions reported earnings and earnings well above analyst averages. What's more, all four companies are also forecasting similar revenue growth next quarter, with Synaptics in particular forecasting 43% sales growth this year.

Nvidia will report its quarterly results on February 23rd.

After shares in Facebook parent company Meta Platforms (FB) plunged, Nvidia became the seventh-largest U.S. company on Monday, with a market capitalization of $608.8 billion.

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