According to business publications The Wall Street Journal and the Financial Times, NVIDIA is close to closing a deal to buy British developer Arm Holdings. Sources say the deal will be announced on Monday. Arm’s current owner, Japanese investment firm Softbank, will bail out more than $ 40 billion in cash and stock from the sale after it acquired Arm four years ago for $ 32 billion.
While it looks like Softbank will be making a good profit from the deal, the truth is that Arm’s price has not shown very satisfactory results over the past few years. Four years ago, Arm and NVIDIA were valued at about the same amount. Today, NVIDIA’s capitalization is about $ 330 billion, which is eight times the price it will pay for Arm.
Another interesting point concerns the fact that as a result of the deal, Softbank will receive such a number of NVIDIA shares, which will make the Japanese company the largest shareholder of the latter. Thus, by selling Arm, Softbank through its stake in NVIDIA will bear some of the risks inherent in the deal.
According to sources, these risks are not at all ephemeral. For example, negotiations between the parties were partly delayed due to the situation with the Chinese arm of Arm, where an attempt to remove director Allen Wu from office turned into a forceful confrontation. The dismissed manager who did not want to leave his workplace was somehow able to hold onto his position. At the very least, Financial Times sources have confirmed that Allen Wu continues to manage the Chinese division, which suggests that Arm is somewhat unmanageable in the region.
To finally convince NVIDIA to agree to the acquisition, Softbank even had to reverse its earlier decision to spin off Arm’s IoT businesses and transfer them to a separate company. Thus, NVIDIA will get all the assets of the British developer without exception.
Naturally, such an acquisition will require regulatory approval, which will likely impose obligations on NVIDIA to continue licensing Arm architectures to existing customers. But for NVIDIA, which recently surpassed Intel in terms of capitalization to become the world’s most expensive chip maker, the deal will in any case strengthen its position as an industry leader. Arm technology is valuable to NVIDIA in that it will enable it to gain influence in market segments where it still lacks a presence, primarily in mobile devices. Looking ahead, Arm’s intellectual property could clearly change NVIDIA’s product line, which currently consists primarily of high-performance offerings for gaming systems, supercomputers, and AI systems. In addition, NVIDIA will be able to implement vertically integrated computing projects.
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