Nvidia has called off its planned $40 billion purchase of Arm Ltd. from Japan-based SoftBank over regulatory concerns and obstacles from the FTC and agencies across the world.
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SoftBank Group will instead begin preparing the United Kingdom semiconductor business for an IPO, or initial public offering, the companies said Tuesday.
First announced in September of 2020, the deal was set to see Silicon Valley-based Nvidia acquire Arm for almost $40 billion in total, making it the sixth largest M&A deal of that year. The transaction almost immediately faced scrutiny from various regulators across the globe, culminating in a Federal Trade Commission movement to block the deal on Dec. 2 of 2021. According to the FTC, the deal would have allowed the conglomerate to effectively monopolize and stifle competing next-generation technologies.
After facing “significant regulatory challenges,” the deal will no longer move forward “despite good faith efforts by the parties,” the companies said in their statement.
Founder and CEO of Nvidia, Jensen Huang, said in the statement that, while the agreement will not move forward, “Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come.”
SoftBank initially acquired Arm in July 2016 for $32.5 billion. Its attention will now be focused on planning an IPO for Arm. The investment firm intends to hold the offering within the fiscal year ending March 31, 2023.
Masayoshi Son, representative director, corporate officer, chairman and CEO of SoftBank, said in Tuesday’s statement that “Arm is becoming a center of innovation not only in the mobile phone revolution, but also in cloud computing, automotive, the Internet of Things and the metaverse, and has entered its second growth phase.”
“We will take this opportunity and start preparing to take Arm public, and to make even further progress,” Son added.
According to the American Economic Liberties Project, an antitrust advocacy group, the FTC’s successful challenge is significant because this was a vertical merger, or a deal involving two companies that operate in separate parts of an industry’s supply chain. Vertical mergers have traditionally been more difficult for regulators to challenge compared to horizontal mergers which often have overlaps in their business operations.
“This is an important outcome for Lina Khan and the FTC,” said Matt Stoller, research director at the AELP. “In a bipartisan 4-0 vote, enforcers challenged and blocked a bad deal, while also changing antitrust enforcement.”
SoftBank will retain a $1.25 billion payment that has already been made in connection with the now-defunct deal under the terms of the agreement signed in September 2020. In return, Nvidia will retain an Arm license for 20 years.
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Source: https://www.law360.com/articles/1462929/nvidia-softbank-nix-40b-arm-deal-over-regulatory-hurdles
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