ARM deal set to collapse as Softbank looks to IPO

ARM deal set to collapse as Softbank looks to IPO

Business news |
By Nick Flaherty

SoftBank is gearing up for an initial public offering (IPO) of shares in ARM as an alternative and is under time pressure to do so while semiconductor stocks are still attractive, the report said. It added that there are concerns that an end of a positive market cycle for chips is in sight. A change to an oversupply of manufacturing capacity and collapse of average sales prices (ASPs) would likely hit the revenues and market valuations of companies across the chip sector.

Graphics chip and board company Nvidia proposed to buy processor architecture and core licensor ARM for about $40bn in September 2020. If the deal completes it is likely to be the largest in history of semiconductors. However, the deal has received a lot of criticism from ARM licensees on the basis that Nvidia competes with licensees of ARM cores and architectures. ARM’s independence from all its customers has been key tenet of its business proposition to date.

The deal also faces detailed scrutiny from the UK, European, US and Chinese regulators at a time when the strategic significance of semiconductor technology is being underlined by the rapid heating of a technology-focused east-west cold war. Nvidia and Arm have made little to no progress in the 16 months since the deal was announced.

Publicly Nvidia and Arm continue to back the deal as the best way forward for Arm. A joint submission from the companies to the UK’s Competition and Markets Authority recently published warned that Arm was too weak to compete with Intel without the backing of a rich owner.

Next: Deal or no-deal

The UK and European regulators are both taking a long look at the takeover and appear to be disinclined to allow it. China is awaiting outcomes in Europe but, according to an unnamed Bloomberg source, are also inclined to block the deal, if it makes progress elsewhere. The source said the Chinese authorities do not expect to have to consider the matter.

The deal even faces hurdles in the US. In December the Federal Trade Commission sued to block the deal saying it would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals (see US sues Nvidia over ARM deal).

The account quotes an Nvidia spokesperson saying: “We continue to hold the views expressed in detail in our latest regulatory filings – that this transaction provides an opportunity to accelerate Arm and boost competition and innovation.”

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