Nvidia-Arm deal collapses; Arm to IPO with new CEO
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It's official. Nvidia's (NASDAQ:NVDA) planned acquisition of Arm (ARMHF) from SoftBank (OTCPK:SFTBY) has been terminated due to "significant regulatory challenges." Nvidia had been seeking a tie-up with the processor designer since September 2020, and with the transaction valued at "$40B in cash and stock" at the time (and $80B currently), it would have been the chip sector's largest deal on record. Arm was founded in 1990, and was an independent company until 2016, when SoftBank bought it for $32B.
Backdrop: Nvidia's purchase faced scrutiny from the moment it was announced. The deal would have given one of the biggest chip companies control over designs that rival firms rely on to develop their own competing chips. The Federal Trade Commission ended up suing on antitrust grounds, while the U.K.'s competition regulator announced an investigation into the sale. Clients like Microsoft (NASDAQ:MSFT) and Qualcomm (NASDAQ:QCOM) also feared that Nvidia could one-up its business over those who don't have a substitute for ARM technology.
As for Softbank, the company will make some money from the transaction getting called off. A breakup fee of $1.25B will be recorded as profit in Q4, while semiconductor industry veteran Rene Haas will replace Simon Segars as Arm's new chief executive. Following the collapsed deal, SoftBank is planning to take Arm public, with an IPO expected to happen in the fiscal year ending March 2023.
More on Nvidia: The company became the seventh-largest U.S. firm yesterday after surpassing Meta Platforms for the first time (the Facebook parent has lost $267B in market cap since earnings last week). Putting that in perspective, Nvidia was the 15th-largest American company as of a year ago and the 50th largest as of two years ago. Despite a valuation of $618B, it may have more room to run, with Wells Fargo writing a note on Monday outlining that Nvidia's Ampere GPU architecture was still "early in its cycle."