SoftBank to buy UK chip designer for $43b

SoftBank's deal to buy British chip designer ARM Holdings is its largest to date and marks a departure for the Japanese group, whose tech and telecoms portfolio includes a stake in Chinese e-commerce giant Alibaba but as yet no major presence in the
SoftBank's deal to buy British chip designer ARM Holdings is its largest to date and marks a departure for the Japanese group, whose tech and telecoms portfolio includes a stake in Chinese e-commerce giant Alibaba but as yet no major presence in the semiconductor industry. PHOTO: BLOOMBERG

Japanese group plugs into the Internet of Things in bid to spark radical transformation

TOKYO/LONDON • SoftBank Group is buying British chip designer ARM Holdings in a £24.3 billion (S$43.4 billion) cash deal, the two sides said yesterday, a bold bet on Internet-connected machines that will transform the Japanese group.

ARM, the largest London-listed technology company by market value, is a major presence in mobile processing, with its processor and graphics tech used by Samsung, Huawei and Apple in their in-house microchips.

Components based on ARM-licensed tech are found in most of the world's smartphones, and the group has branched out into other connected devices as smartphone growth slows.

The Cambridge-based ARM 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 stated focus for Mr Masayoshi Son, SoftBank's founder.

The deal, SoftBank's largest to date, marks a departure for the Japanese group, whose tech and telecoms portfolio ranges from US carrier Sprint to a stake in Chinese e-commerce giant Alibaba and humanoid robot "Pepper" - but does not yet include a major presence in the semiconductor industry.

GROWTH ENGINE

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.

MR MASAYOSHI SON, founder of SoftBank.

"SoftBank's position as an entity outside the semiconductor industry allows ARM to retain its independence and protect existing customer relationships, while commitment to UK investment ensures management buy-in," Jefferies analysts said in a note.

Under the offer backed by ARM's board, SoftBank will pay £17 for every ARM share - a premium of more than 40 per cent to last Friday's close. ARM shares surged nearly 43 per cent to £16.99 yesterday.

"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," Mr Son said.

The acquisition is the first for Mr Son, 58, since he last month rescinded plans to retire - effectively pushing out his heir apparent, former Google executive Nikesh Arora.

Mr Son, whose lucrative early investments include Alibaba, said then that he wanted to "cement SoftBank 2.0", turn around loss- making Sprint and "work on a few more crazy ideas".

Softbank has raised nearly two trillion yen (S$26 billion) in cash over the last few months through asset disposals, Mr Son said.

Under the offer, greeted by the British government as proof that the economy is "open for business", SoftBank said it was committed to keeping the top managers, ARM's headquarters and to at least double the employee headcount in Britain.

Analysts said a counterbid was not impossible but also unlikely as any rival bidder among ARM's customers or Chinese rivals could face regulatory challenges.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 19, 2016, with the headline 'SoftBank to buy UK chip designer for $43b'. Print Edition | Subscribe