Friday 23 February 2018

UK tech giant bought for €29bn in biggest takeover since EU vote

Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Group, gestures whilst speaking during a news conference in London
Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Group, gestures whilst speaking during a news conference in London

David Ramli and  Jeremy Kahn

SoftBank Group has agreed to buy ARM Holdings for £24.3bn (€29.1bn), securing a slice of virtually every mobile computing gadget on the planet and future connected devices in the home.

The Japanese company is offering 1,700 pence in cash per share or a 43pc premium to Friday's close, according to a statement yesterday.

The deal would be the biggest-ever for SoftBank, which under chairman Masayoshi Son became one of Japan's most acquisitive companies with stakes in wireless carrier Sprint and Alibaba Group Holding.

"This all happened very, very quickly," ARM chief executive officer Simon Segars said.

"They made an offer that was very, very compelling for our shareholders and a proposal for how to invest in the company for the future."

SoftBank will gain control of a cash-generating mobile industry leader that gets royalties every time clients such as Apple, Samsung or Qualcomm adopt its designs, which are considered power-saving and efficient.

The deal is the biggest takeover of a British company since the country decided to leave the European Union and comes after the pound plummeted against the Japanese yen.

"Just three weeks after the referendum decision, it shows that Britain has lost none of its allure to international investors," UK chancellor Philip Hammond said in a statement.

ARM's headquarters will remain in Cambridge as well as its senior management team, and SoftBank pledged to at least double employee headcount in the UK over the next five years. ARM currently employs about 4,000.

It will fund the acquisition partly through cash and loans, according to the statement.

ARM's shareholders will get a dividend of 3.78 pence per share. "ARM has what we view as an unassailable library of IP processor designs based on chip performance, size and power performance," Neil Campling, an analyst with Northern Trust Capital Markets, wrote.

"ARM is growing at 10 times the rate of the semiconductor industry it serves and is increasingly the glue that binds the disruptive forces of the entire digital world, not just $700 smartphones." SoftBank approached ARM, which didn't run an auction process, two people familiar with the matter said before the announcement.

SoftBank had been considering a purchase of ARM before the UK's decision to leave the EU, but Simon Segars did not think Brexit and the pound's subsequent fall in value against other currencies, such as the yen, was a driving motivator for Softbank.

"This was not driven by Brexit at all," Mr Segars said. "This is about driving the future."

He said there will be no changes in the way ARM operates, and Softbank will allow the company to continue to exist as a standalone unit.

"We've been completely independent since our IPO and that is something that our partners value," Mr Segars said, referring to ARM's semiconductor manufacturing customers.

He added that Softbank "will keep investing in our roadmap of existing technologies" and "we are not getting acquired by someone who wants to strip costs out of the business".

ARM has come to dominate the design of smartphone chips and is pushing into servers to challenge Intel, evolving from a small lab in a converted barn to a company whose designs are found in 95pc of smartphones.

With the mobile phone market slowing, ARM is adding new customers in the automotive industry and targeting growth in processors for network equipment makers and servers.

The company is also exploring chip designs to boost the graphics capabilities of phones. (Bloomberg)

Irish Independent

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