Nvidia buys Arm for USD 40 billion

Nvidia announced a definitive agreement to buy Arm from SoftBank for USD 40 billion, minus Arm's IoT Services Group. Nvidia founder and CEO Jensen Huang said the deal will unite Nvidia’s AI computing with Arm’s CPU expertise to create an AI superpower and advance computing from the cloud, smartphones, PCs, self-driving cars, robotics, 5G and IoT. It will also expand Nvidia’s developer reach from 2 million to over 15 million software programmers. 

Under the agreement, Arm will keep its headquarters in Cambridge, UK, its name and brand identity, its CEO Simon Segars, and its management team. Nvidia will expand Arm’s R&D presence in Cambridge by establishing a new AI research and education centre, and building an Arm/Nvidia-powered AI supercomputer for research in healthcare, life sciences, robotics, self-driving cars and other fields. The centre will serve as Nvidia’s European hub to cooperation with universities, industrial partners and startups. It will also be the Nvidia Deep Learning Institute for Europe, where the company will teach AI application methods. 

Nvidia also pledged to maintain Arm's open-licensing model and global customer neutrality. Arm counts among its customers most major smartphone markers, including Apple, Samsung and Qualcomm, with its licensees shipping 180 billion chips to date. 

Financially, the deal is expected to be immediately accretive to Nvidia’s adjusted gross margin and adjusted earnings per share. SoftBank will keep a stake in Nvidia, expected at under 10 percent. Nvidia will pay SoftBank a total of USD 21.5 billion in Nvidia stock and USD 12 billion in cash. SoftBank may receive up to USD 5 billion in cash or common stock under an earn-out construct, subject to satisfaction of specific financial performance targets by Arm. Nvidia will also issue USD 1.5 billion in equity to Arm employees. It plans to finance the cash portion of the transaction with balance sheet cash. 

Although the transaction has been approved by the board of directors of both Nvidia and Arm, it is still subject to the usual closing conditions, including regulatory approvals from the UK, China, the European Union and the US. It is expected to close in about 18 months.