Softbank’s £25bn Arm deal boost at risk

SOFTBANK will miss out on a stunning rally in Nvidia’s share price worth around $32.5bn (£24.6bn) if its sale of British chip designer Arm falls through.

Nvidia had been due to buy Arm, a Cambridge-headquartered company which designs microprocessor technology used in billions of smartphones, for $40bn in a deal announced in September 2020. However, the takeover has been thrown into doubt by multiple investigations from competition watchdogs.

That sale included 44m Nvidia shares, at the time worth $21.5bn. The share portion of the transaction was worth about $54bn yesterday, taking the overall value of the takeover to $72.5bn for the Japanese investment titan Softbank.

On Thursday, US regulators said they would take legal action to block the deal. The Federal Trade Commission said it was suing to “prevent a chip conglomerate from stifling the

innovation pipeline for next generation technologies”.

Arm designs semiconductor technology which it then licenses to chip makers around the world. However, its customers have warned that the sale to Nvidia could allow the American tech giant to limit their access to its designs.

Nvidia, which makes graphics chips, has defended the deal, arguing it would bring new investment to Arm and that it would protect its business model.

Nvidia said: “As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition.”

Softbank did not respond to a request for comment.

The takeover is also facing an indepth investigation in the UK, amid national security concerns, and an inquiry by the European Union. It is also expected to be scrutinised by Chinese regulators.

Should the deal fail to close due to regulatory hold ups, Nvidia could lose a $1.25bn downpayment it has made to Softbank.

The deal, which was announced in September 2020, was originally due to close in early 2022, although it is now expected to drag on until at least September. While Softbank is thought to be willing to float Arm should the deal collapse, the value of Nvidia’s shares could eclipse a public listing.

Despite hold ups to the deal, Nvidia’s shares are up 140pc since last September. Its shares dropped 5.8pc yesterday in New York.