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Japanese telco says deal will drive adoption of mobile chip designer’s intellectual property.
Japan’s Softbank on Monday agreed a £24 billion (€28.8 billion) acquisition of mobile chip designer ARM.
Under the terms of the transaction, Softbank will pay £17 (€20) per share for the entire issued and to-be-issued share capital of ARM. The offer represents a 43% premium on ARM’s Friday closing price. At least 75% of ARM shareholders need to vote in favour of the deal for it to become effective.
"We have long admired ARM as a world renowned and highly respected technology company that is by some distance the market leader in its field. ARM will be an excellent strategic fit within the Softbank group as we invest to capture the very significant opportunities provided by the Internet of Things," said Softbank CEO Masayoshi Son, in a statement.
ARM licences its semiconductor designs for other companies to use in their devices. Its biggest market is mobile, where ARM-designed processors can be found in Apple’s iPhones and iPads, as well as numerous products running on Android.
ARM designs are also used in home entertainment products and gadgets such as Blu-ray players and digital cameras, as well as in devices like smart meters, connected cars, and even some servers.
Softbank has pledged to at least double the number of ARM employees in the U.K. over the next five years, as part of a plan to grow the company through continued R&D investment and complementary acquisitions.
"It is the view of the board that this is a compelling offer for ARM shareholders, which secures the delivery of future value today and in cash. The board of ARM is reassured that ARM will remain a very significant U.K. business and will continue to play a key role in the development of new technology," said ARM chairman Stuart Chambers.
Softbank expects the deal to close in the third quarter, subject to shareholder and regulatory approvals.
The deal is being partially funded by debt provided under a ¥1 trillion (€8.6 billion) facility from Mizuoh Bank. The balance is being funded by Softbank’s existing cash resources.
"I suspect that if Softbank is successful at increasing ARM’s position through accelerated investments, we will see ARM return to the market in the form of another IPO, just at a much higher level in five to 10 years’ time," predicted Radio Free Mobile founder Richard Windsor, in a research note.
"I can’t see any reason why Softbank would want to hold onto this as there is no strategic fit, synergies or integration benefit to be had from owning ARM," he said.
Indeed, a chip designer like ARM is not the most obvious fit for a telco, but then again, Softbank is not your typical telco, thanks mainly to its eccentric founder and CEO Masayoshi Son.
In March, the company restructured itself into two operating units, one for its domestic businesses, the other for its growing portfolio of international operations, U.S. telco Sprint, its stake in Chinese e-commerce giant Alibaba, handset distributor Brightstar, plus a slew of various start-ups in the U.S. and Asia.
Son recently revealed that he plans to stay on as CEO for the next five to 10 years, to "work on a few more crazy ideas."
That decision brought about the departure of Son’s successor-in-waiting, former Google exec Nikesh Arora.
