Nvidia, SoftBank call off blockbuster Arm deal

SoftBank revives plans to take the UK-based chip-design specialist public, aims to launch IPO before the end of the year.

Arm, based in Cambridge, England, is one of the world’s most important behind-the-scenes semiconductor businesses

Nvidia Corp and Japan’s SoftBank Group Corp. are abandoning a blockbuster deal for the US semiconductor giant to acquire chip-design specialist Arm after regulators raised antitrust concerns, a person familiar with the matter said.

SoftBank, which owns Arm, now plans to pursue a public listing for the UK-based chip business, the person said.

The US graphics chip giant in September 2020 agreed to buy Arm for $US40bn ($56bn) from SoftBank in what would have been the chip industry’s biggest deal ever. The nominal value of the deal had risen along with Nvidia share price that has advanced sharply in the intervening time amid booming semiconductor demand.

The proposed deal quickly raised eyebrows with regulators and chip-making rivals. The Federal Trade Commission in December sued to block the transaction, alleging it would give Nvidia unlawful control over computing technology and designs that rivals need to develop their own competing chips.

SoftBank stands to pocket a $US1.25bn break-up fee from the failed transaction with Nvidia, the person said.

This isn’t the first time regulators have up-ended a massive chip deal. The US, in 2018, derailed Broadcom’s attempted $US117bn takeover of another chip giant, Qualcomm Inc, on national-security grounds. Qualcomm’s $US44bn purchase of Dutch chip maker NXP Semiconductors NV fell apart in 2018 when China failed to give its regulatory approval.

Arm, based in Cambridge, England, is one of the world’s most important behind-the-scenes semiconductor businesses. Companies such as Apple, Qualcomm and Advanced Micro Devices rely on its design expertise for some of their chips, with Arm acting as a kind of Switzerland to the chip industry — offering its designs to everyone without favouring any one company. Nvidia and Arm had vowed that wouldn’t change if the deal went through.

SoftBank, which bought Arm almost six years ago for $US32bn, had struggled to jump-start growth in the business. Before agreeing to sell Arm to Nvidia, SoftBank had considered taking the business public. SoftBank plans to complete its revived plans for an Arm IPO before the end of its next fiscal year, which starts in April, the person said.

Arm will have a new boss during the IPO process. Simon Segars has decided to step down, the person said, to be replaced by Rene Haas, another company executive.

The US isn’t the only jurisdiction where the transaction was facing scrutiny. Britain’s antitrust regulator last year began an in-depth investigation of the proposed transaction, citing both competition and national-security concerns. The regulator had previously said that Nvidia’s acquisition of Arm would lead to a realistic prospect of less competition, less innovation and more expensive products. China also had begun a review of the deal, as had others.

For Nvidia chief executive Jensen Huang, the proposed acquisition of Arm represented one of his biggest bets to expand beyond the company’s historic niche of making graphics processors used heavily in video games and for artificial-intelligence calculations and cryptocurrency mining. It came in a year that Nvidia overtook Intel as America’s biggest semiconductor company by market value and only a few months after Apple said that it was ditching Intel in its Mac computers in favour of its own chip design with Arm ingredients.

More recently Mr Huang has his sights set on the so-called metaverse, a loosely defined group of online realms where users playing as avatars can hang out and participate in immersive experiences with others. Nvidia is offering software called Omniverse Enterprise that offers collaboration and simulation tools such as the ability to create interactive artificial-intelligence avatars.

The Wall Street Journal