SoftBank’s $66 billion sale of Arm chips to Nvidia collapsed

According to three people with direct knowledge of the transaction, SoftBank’s $66 billion sale of its Arm chip business to Nvidia to Nvidia collapsed on Monday after regulators in the US, UK and The EU raises serious concerns about its effect on competition in the global semiconductor industry.

The largest-ever deal in the chip sector will give California-based Nvidia control of a company that makes the technology at the heart of most of the world’s mobile devices. Several major Tech companies that rely on Arm’s chip designs, including Qualcomm and Microsoft, have opposed the acquisition.

SoftBank will receive a breakup fee of up to $1.25 billion and is looking to get rid of Arm through an initial public offering before the end of the year, one of them said.

The failure could lead to a management upheaval at Arm, the person added, with the replacement of chief executive Simon Segars by Rene Haas, the company’s head of intellectual property.

The deal’s collapse robbed SoftBank of a major windfall it would have earned thanks to Nvidia’s stock price boom.

Up to $38.5 billion worth of cash and stock trades as it’s announced in September 2020. But the value has skyrocketed as Nvidia’s stock has rallied, reaching a peak of $87 billion last November.

In the UK, where politicians see Arm as a strategic national asset, attention will turn to whether the company is listed on the country’s domestic market. An Englishman competitive assessment the agreement was extended late last year to include national security considerations.

However, people close to SoftBank said the group liked the idea of ​​listing Arm in New York and would seek to fend off nationalist pressure. US markets offer higher valuations for tech stocks, even after a recent sharp reversal and UK tech executives recently pressed to make changes to the listing arrangement to make London more appealing.

A person familiar with the discussion said Nvidia decided to drop its pursuit of Arm at an earlier board meeting on Monday. The pursuit of Arm marked an opportunistic attempt to hit the bottom line with chip rivals such as Intel and AMD, and was spurred on by an approach from SoftBank after the Japanese company decided to scrap the operation. business.

Jensen Huang, Nvidia’s chief executive officer, hopes to use Arm’s processor designs to bolster his company’s growing role in data centerwhere its graphics processor has become an important tool for machine learning.

However, some of the major Tech companies that relied on Arm’s design for their own chips argued that Nvidia would gain an unfair advantage by having first-hand rights to Arm’s technology, hurting the competitive edge. painting.

Nvidia has suggested to competition regulators that it will maintain sales to other Arm customers after the deal is closed. However, the UK’s Competition and Markets Authority said it did not believe any such deal would work, and the US Federal Trade Commission issued a in-depth investigation last year.

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