NVIDIA to acquire Arm for $40bn

NVIDIA and SoftBank Group have agreed on the acquisition of Arm in a transaction valued at $40 billion.

The deal brings together NVIDIA’s artificial intelligence (AI) computing platform with Arm’s microchip-making ecosystem, "accelerating innovation while expanding into large, high-growth markets".

SoftBank will retain an ownership stake in NVIDIA, expected to be under 10 per cent.

Jensen Huang, founder and chief executive of NVIDIA, stated: “In the years ahead, trillions of computers running AI will create a new Internet of Things (IoT) that is thousands of times larger than today’s internet of people - our combination will create a company fabulously positioned for the age of AI.

“For Arm’s ecosystem, the combination will turbocharge Arm’s R&D capacity and expand its IP portfolio with NVIDIA’s world-leading GPU and AI technology."

Crucially, Huang committed to keep Arm headquartered in Cambridge.

"We will expand on this great site and build a world-class AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields - and to attract researchers and scientists from the UK and around the world to conduct ground-breaking work, NVIDIA will build a state-of-the-art AI supercomputer, powered by Arm CPUs."

This move follows concerns that British jobs would be lost and decision-making shifted to the US, with the Labour Party last week urging the government to intervene.

However, Arm's co-founders Hermann Hauser and Tudor Brown warned of potential conflicts of interest, since the company's clients would become dependent on a business with which many also compete for sales.

Speaking to Radio 4' Today programme, they also claimed that once Arm was owned by an American firm, the US government could try to block Chinese companies from using its tech as part of a wider trade clash between the countries.

"If Arm becomes a US subsidiary of a US company, it falls under the CFIUS [Committee on Foreign Investment in the United States] regulations," Hauser stated.

"That means that if hundreds of UK companies that incorporate Arm's [technology] in their products, want to sell it, and export it to anywhere in the world including China - which is a major market - the decision on whether they will be allowed to export it will be made in the White House and not in Downing Street."

He added that the pledge to retain and increase the number of UK jobs was "meaningless" unless UK ministers stepped in to make it legally enforceable.

In a separate statement, Arm chief executive Simon Segars said: “By bringing together the technical strengths of our two companies we can accelerate our progress and create new solutions that will enable a global ecosystem of innovators.”

As part of NVIDIA, Arm will continue to operate its open-licensing model, while maintaining the global customer neutrality that has been foundational to its success, with 180 billion chips shipped to-date by its licensees.

SoftBank and Arm said the were fully committed to satisfying the undertakings made by SoftBank when it acquired Arm in 2016, which are scheduled to complete in September 2021.

Following the closing of the transaction, NVIDIA intends to retain the name and strong brand identity of Arm and expand its base in Cambridge. Arm’s intellectual property will also remain registered in the UK.

NVIDIA will invest in an Arm-powered AI supercomputer, training facilities for developers and a startup incubator.

Under the terms of the transaction, which has been approved by the boards of directors of NVIDIA, Softbank Group and Arm, NVIDIA will pay to SoftBank a total of $21.5 billion in NVIDIA common stock and $12 billion in cash, which includes $2 billion payable at signing.

The number of NVIDIA shares to be issued at closing is 44.3 million, determined using the average closing price of NVIDIA common stock for the last 30 trading days. Additionally, SoftBank may receive up to $5 billion in cash or common stock under an earn-out construct, subject to satisfaction of specific financial performance targets by Arm.

NVIDIA will also issue $1.5 billion in equity to Arm employees.

NVIDIA intends to finance the cash portion of the transaction with balance sheet cash. The transaction does not include Arm’s IoT Services Group.

The proposed transaction is subject to customary closing conditions, including the receipt of regulatory approvals for the UK, China, the European Union and the United States. Completion of the transaction is expected to take place in approximately 18 months.

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