Nvidia seals $40bn deal for SoftBank’s Arm

Britain set to impose strict terms including protection of jobs and maintaining UK headquarters

SoftBank has agreed to sell Arm Holdings to US chip company Nvidia for up to $40bn, ending four years of ownership as the Japanese technology group shifts towards becoming a global investment and asset management powerhouse.

The UK chip designer is the latest large asset disposal orchestrated by SoftBank founder Masayoshi Son as his newly built war chest opens up options for the group including an expansion of trading into publicly listed technology stocks and a potential delisting of its own shares.

Under the deal, SoftBank will become one of the largest shareholders in Nvidia, which will pay the Japanese group $21.5bn in common stock and $12bn in cash.

An additional $5bn cash payment will be made if Arm hits certain financial performance targets.

Nvidia will also issue $1.5bn in equity to Arm employees. 

“We look forward to supporting the continued success of the combined business,” Mr Son said in a joint statement with Nvidia late on Sunday.

SoftBank’s Tokyo-traded stock jumped as much as 10 per cent on Monday, putting the group on track for its biggest one-day gain since March.

The agreement comes as UK ministers are set to impose strict conditions on the cash-and-stock takeover deal, including the protection of jobs and the maintenance of Arm’s UK headquarters in Cambridge.

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Oliver Dowden, culture secretary, is also considering whether to “call in” the deal under the Enterprise Act 2002, which would mean an extensive review by the Competition and Markets Authority.

In the joint statement, Jensen Huang, founder and chief executive of Nvidia, sought to allay such concerns, promising to maintain Arm’s brand and expand its base in Cambridge. “We will expand on this great site and build a world-class artificial intelligence research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields,” Mr Huang said.

UK ministers can call in mergers under four different grounds — financial security, media plurality, public health or national security — in a process that would trigger a CMA review taking up to several months.

If Mr Dowden proceeds with a formal intervention it would be on national security grounds, because the group is a major supplier to the defence industry, according to officials.

One government figure said that Mr Dowden was “minded” to refer the deal to the CMA. However, one ally of the culture secretary said no decision had yet been taken and that speculation was “premature”.

A review by the CMA would be in contrast to four years ago when the SoftBank takeover of Arm was waved through by the business secretary at the time Greg Clark, albeit with certain conditions.

On that occasion the government compelled the Japanese company to keep Arm’s headquarters in Cambridge and to create at least 1,500 new jobs at the chip designer over five years. “You would expect us to take a very close interest in this company given it is a national tech champion,” said one official.

The deal is a big test of prime minister Boris Johnson’s approach to Britain’s industrial strategy.

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The takeover values Arm above the $32bn price that SoftBank paid for the business in 2016, a deal that was struck weeks after the Brexit vote and which prompted critics including Arm’s founder to accuse the UK of selling off the crown jewel of its tech sector.

Ed Miliband, shadow business secretary, told the Financial Times last week that it was vital to secure Arm’s headquarters and 3,000-strong UK workforce if the deal went ahead. Mr Miliband said the government should seek legally binding assurances from Nvidia that it would not move “jobs and decision-making” to the US.

On Sunday night a government spokesperson said that while proposed acquisitions were primarily a commercial matter, they were monitored closely by ministers.

“Where we feel a takeover may represent a threat to the UK, the government will not hesitate to investigate the matter further, which could lead to conditions on the deal.” 

The Enterprise Act 2002, which governs takeovers, was updated earlier this year to include companies which can influence the UK’s ability to deal with public health emergencies.