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It is revealed that Nvidia will acquire ARM at the end of the month at a valuation of up to 40 billion US dollars.

Published :8/17/2020 4:14:40 AM

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According to people familiar with the matter, the acquisition will be completed by the end of the month, and the valuation of ARM may be as high as 40 billion US dollars.


Back in April of this year, the Cambridge-based ARM was listed for sale by its Japanese parent company SoftBank for the first time, when the US investment bank Goldman Sachs was hired to look for potential buyers. SoftBank was in a difficult state at the time. After failing to invest in office-sharing startup WeWork and other companies, SoftBank suffered serious losses.

 

Goldman Sachs initially approached Apple, but the latter was not interested in acquiring the ARM business. The bank subsequently tried to form a consortium, including Qualcomm (Qualcomm), Google, Samsung and Nvidia, these consortiums will all buy shares in ARM. However, in the end Yingwei reached the only interested buyer.

 

The exclusivity period is expected to last 30 to 45 days, after which the two companies will either reach an agreement or open negotiations to other parties. SoftBank can also provide 5% to 10% of ARM shares instead of selling them as a whole. ARM's design is used in billions of chips in almost all smart phones and other devices.


It is reported that Sun Zhengyi, founder of Softbank, hopes to sell ARM for US$40 billion, which is far more than the US$32 billion acquisition cost paid in 2016. Although this figure represents only a small profit, the rate of return is not high compared to the performance of other listed chip companies and technology companies in the past four years.


However, the deal may be closely watched by the British government, and at the same time an agreement reached between the Takeover Panel and SoftBank has resurfaced. According to the agreement, ARM's headquarters will still be located in Cherry Hinton, Cambridge, and the number of UK employees will need to be doubled to about 3,500 by 2021. It is not clear whether these agreements will continue to be implemented by Nvidia.


The Labour MP from Cambridge, Daniel Zeichner (Daniel Zeichner) said the government should ensure that these terms are enforced in the case of ARM sales. He said: "ARM is an iconic company. So far, SoftBank has insisted on fulfilling its post-acquisition commitments. The number of jobs in Cambridge has risen. But it is not clear what the prospects are. If ARM is acquired and moved, these agreements will again what's the point?"

Earlier this week, Zekner wrote to the British Secretary of Commerce Alok Sharma (Alok Sharma,) asking the government to guarantee that ARM would not be sold again. He also asked the government to encourage local British companies to bid to control at least 50% of the company's shares.

 

An ARM spokesperson declined to comment on whether the agreement will continue after the sale. SoftBank and Nvidia declined to comment. Prior to this, SoftBank confirmed that it is considering a whole sale, partial sale or relisting of ARM, but did not disclose who it is negotiating with.

 

It is reported that the British government is closely monitoring the progress of this transaction. However, given that ARM will be sold to a US company, although the company has highly strategic technology, it will almost certainly not cause national security concerns.

 

Chi Onwurah, the shadow science minister of the British Labor Party, said: “ARM was sold to a company with competing interests. We cannot get any guarantee. The government should do something.” She added that the UK should use other industry players and investors to acquire ARM and keep its headquarters in the UK.

 

If Nvidia’s acquisition of ARM is reached, it may also lead to tensions in trade negotiations between the UK and Japan. Britain is seeking to reach a fast-track trade agreement with Japan before leaving the European Union permanently next year.


Industry leaders worry that if ARM is sold to Nvidia, in the long run, ARM will be weakened. ARM's customers are competitors of Nvidia, and they may refuse to issue chip design licenses to their competitors.