China row puts £30billion Arm takeover at risk

THE AMERICAN takeover of Arm is at risk of being derailed after the British company’s Chinese division went rogue.

Nvidia is offering £30bn for the Cambridge-based chip-making company, one of the UK’s top technology firms, which is owned by Japan’s Softbank.

But as the suitors try to push ahead with the blockbuster deal, a corporate coup at Arm’s joint venture in China has thrown a spanner into the works. In a row that first erupted over the summer, Arm China boss Allen Wu has refused to stand aside despite being fired by the company’s board for ‘serious’ rule breaches.

Arm has repeatedly tried to remove pictured right, through official company processes but its attempts have fallen flat, leaving him in de facto control. The rogue executive is even said to have installed his own security team at Arm China’s offices and is denying entry to representatives from his company’s British parent as well as board members.

He has also blocked staff from seeing emails sent to them by Arm, it is claimed. And the extraordinary row is said to be affecting Arm and Nvidia’s tie-up, with the two companies unable to approach Chinese regulators and seek approval for the deal without Arm China’s cooperation, according to the Financial Times.

Alan Mendoza, executive director of think-tank the Henry Jackson Society, said: ‘Arm’s nightmare scenario highlights the dangers of British companies doing business in China without appreciating that the business protections offered in the UK are not in operation there.’

The firm sold a 51pc stake in its Chinese division to a consortium of local investors for £580m in 2018.

The British parent continues to run the division as a joint venture but no longer has majority control of the business, a common situation for Western firms operating in China.

Due to complicated Chinese regulations, Wu is also thought to enjoy a legal advantage because he holds the company’s registration documents and official seal – or stamp – and is refusing to give them up.

Wu is said to have been offered £77m to £153m to depart peacefully – but although a deal was said to be close in September, he has reportedly told colleagues it is ‘not a sure thing’.

Arm China’s board originally attempted to sack the executive after he was accused of improperly setting up an investment fund. Wu has insisted he did not act improperly and refuses to stand aside, however.

Dr Michael Reilly, a China expert at Nottingham University, said the situation prompted questions about ‘how Arm allowed this to happen in the first place’.

‘My immediate reaction when reading about this was that someone has not done their due diligence.’

Arm China has threatened legal action against anyone who ‘ spreads rumours with the hope to damage our reputation’.

A spokesman added: ‘It is in everyone’s best interest for Arm China to remain stable.’