SoftBank Group faces the prospect of losing a jackpot of roughly $74 billion as the sale of Arm to Nvidia in facing hurdles, Bloomberg reported.
U.S. antitrust officials sued to block the takeover on Thursday, arguing it will stifle innovation in the chip industry. The transaction also faces reviews from U.K., European Union and Chinese regulators — as well as opposition from Arm’s own customers.
Nvidia agreed to buy Arm for about $40 billion in September 2020, and a surge in the bidder’s stock price increased the potential payday by tens of billions of dollars. Other suitors are unlikely to match such an offer and might spark their own regulatory concerns.
SoftBank’s best alternative may well be an initial public offering for the Arm business — but that is likely to value the company at far less than Nvidia’s offer.
SoftBank and Arm are entitled to keep $2 billion Nvidia paid at signing, including a $1.25 billion breakup fee, whether the deal goes through or not.
Lil Read, Analyst at GlobalData, said: “Nvidia-ARM deal is on its last legs. The regulatory environment is much tougher now since Qualcomm has formed a consortium to invest in ARM. The FTC won’t let it be – nor will the UK CMA or the EU regulator. It’s likely that even if the deal managed to clear those hurdles, Chinese regulators would throw another spanner in the works.”
David Bicknell, Principal Analyst at GlobalData, says: “As the regulatory noise intensifies, the picture gets clearer: this bid will not get the green light from regulators. There are few alternatives for ARM. It will struggle without backing for research & development (R&D).”
Softbank desperately needs an exit strategy, but its options are limited. ARM could float in the US or hope that the UK government acts as a white knight and props up the homegrown chipmaker to avoid losing yet another leading UK tech company to the US.
Mike Orme, Consultant Analyst at GlobalData, notes: “The elephant in the room is Apple. Despite relying on ARM instruction set for its foundational A and M series families of chips, Apple has kept quiet. It’s an open secret that Apple was offered ARM in 2020. It’s hard to think that Apple is deliriously happy about the prospect of the deal going through.”