Nvidia to buy arm holdings from Softbank in biggest chip deal

   UK-based chip design house has agreed to buy from Arm Holdings 
      <span class="company-name quote-pick" data-track-hover="QuotePeek" data-charting-symbol="9984">
        Softbank group
   About 40 billion dollars for cash, stocks and future ideas. 

It is the largest acquisition in the history of the semiconductor industry and a significant win for SoftBank and its founder and CEO Masayushi Son, who bought the arm in 2016 for $ 32 billion.

Under the terms of the deal, Nvidia (ticker: NVDA) will pay $ 12 billion in cash to SoftBank (9984. Japan), including $ 2 billion payable upon signing, and 44.3 million Nvidia shares worth an estimated $ 21.5 billion. SoftBank may receive up to $ 5 billion in cash or common stock under the Earnings Agreement, subject to the satisfaction of specific financial performance goals for the arm. Nvidia Arm will issue $ 1.5 billion in stock to employees.

SoftBank shares are up 8.3% in Tokyo as of Monday.

“AI is the most powerful technology power of our time and has launched a new wave of computing,” Nvidia CEO Jensen Huang said in a statement on Sunday. “In the coming years, trillions of computers running AI will create a new Internet-of-the-thing that is thousands of times larger than today’s Internet-of-People. Our combination will loyally deploy a company for the age of AI. “

Nvidia will finance the cash portion of the deal from its balance sheet. Nvidia said that Softbank’s stake in the company will be less than 10% after the deal is closed. The deal excludes the Arm of Internet of Things Services group, according to the announcement.

In an interview with Baron, Rene Haas, president of the ARM IP product group, confirmed that the deal did not include Treasure Data, a software platform for managing data generated by IoT applications. In July, there were reports that Softbank had hired Goldman Sachs to find a buyer for the unit with a target price of $ 1 billion.

Nvidia said the deal would be immediately compatible with its non-GAAP gross margin and non-GAAP earnings per share. Nvidia CFO Colette Cress said in an interview with Baron that SoftBank would not get a seat on Nvidia’s board.

“The Nvidia-arm deal is not only the largest semiconductor deal by $ 40 billion in dollar volume, but I believe the most significant impact,” says Patrick Moorehead of chip research firm Moore Insights & Strategy. “I think the deal fits like a glove in the arm that plays in areas that Nvidia isn’t or isn’t successful in, while Nvidia plays or isn’t successful in many places.”

Assuming the eventual practice of performance-based elements of the deal, the transaction would eclipse the $ 37 billion acquisition


In 2016 by Avago (which then took the name of Broadcom). In 2016 SoftBank acquired Arm for $ 32 billion. Current arm equity is held 75% by SoftBank Group and 25% in the company’s $ 100,000 Venture Capital portfolio by SoftBank Vision Fund.

Nvidia said that Arm will have its headquarters in Cambridge in the UK

Nvidia said that this arm’s open-licensing model was “shipped to its licensors, along with 180 billion chips, while maintaining global customer neutrality that is fundamental to its success.” The arm will bear its name, and its intellectual property will remain registered in the UK

Softbank’s son said in a statement that “Nvidia is the right partner for the arm.”

Asked about the report that some UK officials were opposing the deal, Arm Hass said people were unaware of some of the negative comments that Nvidia intends to maintain on both its business model and strategy . He said that Nvidia planned to build a large supercomputer in the Arm Cambridge campus.

For the lengthy closing process – which is expected to take about 18 months – Nvidia’s Cress said that primarily reflects the time to obtain the necessary regulatory approvals. She points out that Nvidia recently went through a similar set of approvals in the US, Europe and China for the acquisition of Mellanox Technologies. “We have a good sense of how we work,” she says, and we’re ready to get on the road again.

Meanwhile, both Bloomberg and the Financial Times reported over the weekend that SoftBank could use the proceeds from recent transactions along with other cash to take the company private – SoftBank’s recent market cap of about $ 105 billion in the company’s underlying net assets. Is less than half of the value.

Arm Design Chips licenses the design to companies such as Broadcom, Apple, Marvel and Nvidia, and collects royalties when companies sell arm-based chips. ARM’s biggest market has long been mobile devices — arm-based processor power in more than 95% of the world’s smartphones and tablets.

When SoftBank’s arm acquisition was announced four years ago, Masayoshi Son said he hoped to become a key driver of the Arm of Internet of Things, which became a major focus for its 100 billion vision fund, The same year saw a venture capital portfolio debut. Softbank bought ARM.

There has been speculation since July that SoftBank was considering options for a sale or spinoff of the arm, and Massa confirmed with the media on the company’s most recent earnings call that it was negotiating with an unspecified prospective bidder Was widely regarded as Nvidia.

Yet the deal is a stunner, which follows a series of transactions over the past six months aimed at reducing both SoftBank’s stock price and Massa’s reputation, which the company’s short-term real estate last year The rental company was tarnished by troubled investments in WeWork. . The Nvidia / Arm combination may face opposition from arm licensees who see Nvidia as a rival – and it is also making some political push in the UK, though the company is simply a Japan-based owner for a California-based one Will trade .

In March, under pressure from active investment firm Elliott Management, SoftBank announced plans to raise $ 41 billion in cash through asset sales, with the goal of paying back debts and buying back loans. The company has almost completed that program, through the sale of most of its stake

T Mobile

(Which it acquired through the acquisition of its majority stake in Sprint), and some of its holdings in the majority Japanese wireless carriers of both Alibaba (BABA) and SoftBank Corp. In addition to that program, the company recently announced plans to sell about a third of its remaining position in SoftBank Corp. for $ 13.5 billion, in an offering that would reduce its stake from 62% to nearly 40% .

Announcing its June-quarter earnings, SoftBank said it had spent about 1 trillion yen – about $ 9.4 billion – to buy back the stock, using proceeds from recent asset sales, and it made its latest quarterly The net debt position has decreased by about $ 14 billion. Softbank said at the time of its earnings announcement that it plans to buy back at least 1.5 trillion yen of stock.

Announcing the earnings, SoftBank also said that it was changing the way it reported financial results to reflect the fact that the company was in fact an investment company and not an operating company. SoftBank has demonstrated that shift with some recent active maneuvers in the public equity and derivatives markets.

The company announced the creation of a subsidiary with a capital investment of $ 555 million, with two-thirds of the cash received from the company, and one-third from Massa. Announcing the entity, SoftBank specifically stated that it would invest in highly liquid public listed shares through both direct investment and derivative transactions.

As Baron’s In last month’s report, the company reported a $ 611.5 million profit in the June quarter after investing $ 10 billion in large-cap tech companies from its recent asset sales. That investment is unrelated to the new tech stock fund. By the end of the June quarter, the position had grown to $ 3.4 billion.

In a subsequent SEC filing, the company disclosed $ 3.8 billion in technology stockholding as of June 30, reflecting both the new fund and the subsequent technical investment in asset sales.

$ 1 billion stake included in SoftBank


(AMZN) Alphabet (GOOGL) worth $ 475 million and about $ 250 million


(ADBE) share. Other big bets included




(MSFT), and Nvidia (NVDA), all between $ 180 million and $ 190 million, with nine other stockholdings of $ 100 million.

According to several media reports, the company has invested billions of dollars in US equity call options in recent weeks, which seems to have contributed to the recent rally in technology stocks – and could add volatility in recent trading sessions .

Write Eric J. at [email protected] Savitz


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