NVIDIA to acquire Cambridge-based Arm Ltd for £31.15bn

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NVIDIA and SoftBank Group Corp (SBG) have today announced a definitive agreement under which NVIDIA will acquire Cambridge-based Arm Limited from SBG and the SoftBank Vision Fund in a transaction valued at £31.15bn.

The combination brings together NVIDIA’s AI computing platform with Arm’s vast ecosystem to create the premier computing company for the age of artificial intelligence, accelerating innovation while expanding into large, high-growth markets. SoftBank will remain committed to Arm’s long-term success through its ownership stake in NVIDIA, expected to be under 10%.

Jensen Huang, founder and CEO of NVIDIA said: “AI is the most powerful technology force of our time and has launched a new wave of computing. In the years ahead, trillions of computers running AI will create a new internet-of-things 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.

“Simon Segars and his team at Arm have built an extraordinary company that is contributing to nearly every technology market in the world. Uniting NVIDIA’s AI computing capabilities with the vast ecosystem of Arm’s CPU, we can advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to edge IoT, and expand AI computing to every corner of the globe.

“This combination has tremendous benefits for both companies, our customers, and the industry. 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.

“Arm will remain 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 groundbreaking work, NVIDIA will build a state-of-the-art AI supercomputer, powered by Arm CPUs. Arm Cambridge will be a world-class technology center.”

NVIDIA will build on Arm’s R&D presence in the U.K., establishing a new global center of excellence in AI research at Arm’s Cambridge campus. NVIDIA will invest in a state-of-the-art, Arm-powered AI supercomputer, training facilities for developers and a startup incubator, which will attract world-class research talent and create a platform for innovation and industry partnerships in fields such as healthcare, robotics and self-driving cars.

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

Industry reaction

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown

The Nvidia/Arm tie up has been a long courtship – with news that a deal was on the cards first hitting newspapers back in July. While NVIDIA is best known for its gaming graphics chips and Arm for its smartphone chips, this deal is being predicated on Artificial Intelligence – an area where NVIDIA has expertise but which is really in its infancy. By drawing on Arm’s huge pool of active devices, as well as its technical knowhow, NVIDIA’s hoping it can crack a technology with potential applications in cloud, smartphones, PCs, self-driving cars, robotics and the Internet of Things. It’s a big and uncertain bet, and comes at a high price. Fortunately the two groups have core businesses which are very cash generative, and together they should be able to quickly pay down any financial hangover from the deal.

However, the agreement isn’t cast iron yet. Prior to its 2016 acquisition by Softbank, Arm was seen as one of the UK’s technological jewels, and approving its sale to an overseas buyer was politically sensitive. That’s probably more the case now than ever – and with Softbank’s official commitments to Arm’s Cambridge site due to expire in 2021 the deal may well come with additional strings attached from the UK government.

ARM customers could vote with their feet after takeover

John Colley, Associate Dean of Warwick Business School and an expert in mergers and acquisitions, said: “Some might argue that the increase in value of Arm during Softbank’s tenure of ownership is more about running down the clock on undertakings to government. N

“Now that they are almost released, obligations to increase U.K. employment and retain a U.K. head office mean much more flexibility for a new owner.

“US owners have not previously been careful with U.K. businesses such as the infamous Kraft Cadbury takeover in which promises were rapidly dropped. Arm is likely to go the same way unless the government chooses to intervene.

“Independent ownership is a big plus from a customers perspective. In this case some customers will have to buy from a competitor following the deal. The evidence is that they don’t, they simply vote with their feet and take their trade elsewhere.

“The somewhat binary tech trade tensions between the US and China are also likely to polarise trade depending on which side of the divide one sits. Independence might avoid many of these problems which will result in less U.K. jobs.”

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